ANKUR TYAGI
The National Pension System (NPS) is set for some of its most significant reforms yet, with several updates scheduled to take effect from October 1, 2025, and others under draft review. These changes are aimed at giving investors more flexibility, higher equity exposure, and easier withdrawal options.
✅ Key Changes Effective October 1, 2025
100% Equity Option for Non-Government Subscribers
Investors outside the government sector will soon be allowed to allocate up to 100% of their NPS contributions into equities, a major shift from the current capped exposure.
Multiple Scheme Framework (MSF)
Subscribers will be able to manage multiple schemes across different record-keeping agencies under a single PRAN, offering more choice and flexibility.
Revised Account Charges
The cost structure for maintaining NPS and related accounts (including NPS-Vatsalya, UPS, and APY) will be revised, with variations depending on the account type and mode of operation.
⚖️ Draft Proposals Under Review
Flexible Exit & Extended Tenure
- Exit may be allowed after 15 years, with an option to extend the account up to age 85.
- Expanded definitions of “exit” will provide more scenarios for flexibility.
Higher Withdrawal Proportion
- Proposed increase in lump sum withdrawal from 60% to 80% of corpus at retirement.
- Mandatory annuity purchase may reduce to just 20% of accumulated funds.
- Partial withdrawals could become more frequent and simpler.
Loan Facility Against NPS
A proposal is under discussion to allow subscribers to take loans against their NPS corpus by placing a lien on their pension wealth.
Rules for Late Entrants
For those joining NPS after 60 years of age, at least 20% of their retirement corpus may need to be used for an annuity, with the rest available for withdrawal.
🔄 Other Updates
- Corporate NPS Flexibility: Employees may get the option to change pension fund managers and asset allocation after one year, even if initially chosen by their employer.
- Switch Between Schemes: Central government employees under the Unified Pension Scheme (UPS) can switch back to NPS once, with a deadline of September 30, 2025.
📌 What This Means for Investors
- Higher Growth Potential: The option for full equity allocation may significantly boost long-term returns for risk-tolerant investors.
- Greater Control: New withdrawal rules and loan facilities give subscribers more ways to use their retirement savings.
- Flexibility in Planning: Extended tenure and higher withdrawal limits help align retirement planning with personal needs.
- Risk Awareness: Equity-heavy allocations also bring higher volatility, so careful selection remains key.
📝 Final Word
These changes mark a transformative phase for NPS, turning it into a more investor-friendly and flexible retirement tool. With enhanced equity options, easier exits, and the possibility of loans, subscribers will soon enjoy greater control over how they build and use their pension wealth.
Abhishek Sinha
