New Era for Retirement Savings: NPS 2.0 to Offer Flexibility from October 1

In a landmark move set to reshape retirement planning in India, the Pension Fund Regulatory and Development Authority (PFRDA) has announced the rollout of a Multiple Scheme Framework under the National Pension System (NPS) for non-government employees. Effective October 1, 2025, this reform now called NPS 2.0 by many, will change how non-government subscribers manage their pension savings, offering greater flexibility, choice, and control.

The changes are coming in two waves. The first, the Multiple Scheme Framework, is set to be rolled out on October 1, 2025. A separate draft proposal, open for public comments until October 17, introduces significant changes to the rules governing exits and withdrawals.

The new framework allows subscribers to hold and manage more than one scheme under a single Permanent Retirement Account Number (PRAN) across different Central Record keeping Agencies (CRAs).

What Changes from October 1?

• Various Investment Options: Pension Funds can now launch specialized schemes designed for groups, such as corporate employees, gig workers, and self-employed professionals. Each scheme will offer at least two variants: a moderate-risk and a high-risk option.
• 100% Equity Allocation: A major highlight of the new framework is the ability to invest up to 100% of contributions into high-risk schemes, a significant increase from the previous cap. This offers a powerful tool for younger investors with a higher risk appetite to build a more retirement corpus.
• Greater Diversification: Subscribers can now balance their investment strategies within the same account, allowing them to allocate funds between conservative and aggressive schemes to align with their life goals.
• Simplified Account Management: The new system will provide transparent, consolidated statements showing scheme-wise and overall account performance, making it easier for subscribers to track their investments.
• Low-Cost Structure: Despite the increased flexibility, the NPS remains a low-cost retirement savings option. Annual charges for the new schemes are capped at 0.30% of assets, with an incentive for Pension Funds that attract a high percentage of new subscribers.

What Stays the Same?

The core principles of the NPS remain intact. Exit rules, including the requirement to use a portion of the corpus to purchase an annuity for lifelong income, are unchanged. Additionally, existing NPS schemes will continue to operate as Common Schemes, and switching between new NPS 2.0 will only be permitted after a 15-year vesting period or at the time of normal exit. This is a condition defined under Section 20(2) of the PFRDA Act. However, subscribers can freely switch between their present scheme and a common (old, existing) scheme during this period. 

This reform, is a significant step toward modernizing India’s pension landscape. By aligning the NPS with global best practices, the PFRDA aims to BUILD innovation among pension funds while giving subscribers the power to truly personalise their path to financial security in retirement.