The Multiple Scheme Framework under the NPS

For two decades, an NPS subscriber could hold only one investment choice in each tier, built from the common asset classes offered by every pension fund. From 1 October 2025, PFRDA introduced the Multiple Scheme Framework (MSF) for non-government subscribers. It allows pension funds to design their own schemes for different groups of subscribers, and allows a subscriber to hold several schemes under one PRAN, including a scheme with up to 100 per cent equity.

1. Legal Basis

• Choice of schemes: Section 20(2) requires the NPS to offer a choice of multiple pension funds and multiple schemes. The MSF expands that choice.
• Approval of schemes: Section 14(2)(b) empowers PFRDA to approve schemes and their terms and conditions, and to lay down norms for management of the corpus.
• Instrument: the MSF was introduced by a PFRDA circular announced in September 2025, effective from 1 October 2025, which is observed as NPS Diwas.
• Exit rules unchanged: exit and annuitisation under MSF schemes remain governed by the Exit and Withdrawal Regulations.

2. Main Features

• Who: non-government subscribers, that is, those under the All Citizen and Corporate models. Government employees are not covered.
• Several schemes per PRAN: a subscriber may hold multiple schemes under a single PRAN with a CRA, instead of a single choice per tier. Holdings are shown together through consolidated statements.
• Schemes designed by pension funds: each pension fund may design schemes for particular groups, such as corporate employees where the employer co-contributes, self-employed professionals, or platform and gig workers in the digital economy.
• Risk variants: each scheme must offer at least two variants, moderate risk and high risk; a low-risk variant is optional.
• Up to 100 per cent equity: in the high-risk variant, equity allocation may go up to 100 per cent, compared with the 75 per cent cap under the common schemes.
• Risk profiling: pension funds must assess the suitability of subscribers using income and socio-economic parameters, to reduce the risk of mis-selling.
• Charges capped: total annual fund management charges are capped at 0.30 per cent of assets under management, with an additional incentive of 0.10 per cent for funds that bring in a high proportion of new subscribers.

3. Switching and Vesting

• Vesting period: switching between the schemes under the Section 20(2) framework is ordinarily permitted only after a vesting period of fifteen years or at the time of normal exit.
• Move to common schemes: a subscriber may switch from an MSF scheme to the common schemes during the vesting period.
• Purpose: the vesting rule encourages long-term holding and prevents subscribers from chasing short-term performance, which tends to reduce returns.

4. The Common Scheme Framework Continues

The MSF does not replace the existing structure. The common schemes, built from equity, corporate debt and Government securities with active and auto choice, continue alongside it. A subscriber who does not opt for an MSF scheme remains in the common framework.

5. Significance

• Product innovation: pension funds can compete on design, not just on returns from identical portfolios.
• Targeting coverage: schemes for gig workers and the self-employed address groups that traditional employer-based pensions miss.
• Higher growth potential: young subscribers with long horizons can hold more equity, which historically offers higher long-term returns.
• Employer engagement: schemes built around employer co-contribution can make the corporate NPS more attractive.

6. Concerns

• Complexity: more schemes make choice harder. The NPS has long been praised for simplicity, and too many options may lead to confusion and poor decisions.
• Risk: a 100 per cent equity scheme can fall sharply in value. If a subscriber nears exit when markets fall, the loss may not be recovered.
• Mis-selling: pension funds and distributors may promote high-risk schemes to unsuitable subscribers. Risk profiling and PFRDA supervision are the safeguards.
• Cost: although capped, charges under the MSF may be higher than under the common schemes, reducing net returns over a long period.
• Legal form: major changes to the NPS architecture were made by circular rather than by regulations laid before Parliament under Section 53, which reduces parliamentary scrutiny of the change.

7. Questions Arising

Does the MSF conflict with the Government securities option in Section 20(2)?

No. Section 20(2) requires that a subscriber be able to choose a scheme invested wholly in Government securities. That option remains available in the common framework. The Act sets a minimum range of choice; it does not prevent PFRDA from offering more.

Can a Government employee join an MSF scheme?

Not for the mandatory Government contributions, which remain under the schemes applicable to Government subscribers. A Government employee may, however, hold a voluntary account in his own capacity subject to the rules applicable to it.

8. Related Topics and Provisions

• Investment choice and minimum assured return schemes
• The National Pension System (Section 20)
• Pension funds and the NPS Trust (Section 23)
• Investment guidelines for pension funds
• NPS across sectors and NPS Vatsalya