PFRDA Introduces Standardized NPS Framework with Five Scheme Categories

NPS subscribers will experience significant changes in pension fund categorization and presentation. A new framework standardizes scheme selection, offering five broad categories for subscribers. Lifecycle schemes will be sub-categorized, while MSF schemes will have five distinct equity exposure levels. The pension body also mandates a new procedure for comparing charges, returns, and risk. This initiative aims to enhance subscriber decision-making regarding their pension investments.

National Pension System (NPS) subscribers will now see major changes in how pension funds are named, classified and presented with the Pension Fund Regulatory and Development Authority (PFRDA) introducing a standardised framework to make scheme selection better. As per new changes underlined in a PFRDA circular dated August 28, 2026, there will be five types of NPS schemes where lifecycle schemes will be sub-categorised into four schemes, while Multiple Scheme Framework (MSF) schemes will be classified into five categories- from aggressive growth to debt based on their equity exposure.

While maximum permissible allocation limit under Active Choice will be from 75% to 100%, NPS Sanchay will have the maximum permissible allocation of 5%-65%.

The pension body has also laid down a new scheme-sellection procedure where subscribers can compare charges, returns, risk level asset under management (AUM) and the benchmark.

What are the different types of NPS schemes?

Under the new framework, NPS schemes will be classified into five broad categories: Lifecycle-based Schemes, Active Choice, NPS Sanchay, Multiple Scheme Framework (MSF), 4A Schemes or curated/thematic schemes.

Categorisation of NPS life cycle-based schemes

Under the new framework, life cycle-based schemes will be further divided into five categories based on equity exposure.

These categories include, Life Cycle Aggressive, Life Cycle 75 – High, Life Cycle 50 – Moderate and Life Cycle 25 – Low. In these categories, equity exposure will range from 25% to 75% and will change with age. In these schemes, the allocation to equity, corporate bonds and government securities changes automatically according to the subscriber's age.

The equity allocation in NPS life cycle-based schemes will follow a pre-determined age-linked glide path as specified in the prescribed asset allocation matrix.

Lifecycle CategoryMaximum Equity ExposureEquity Allocation Over AgeLife Cycle – Aggressive (35E/55Y)50%50%Life Cycle 75 – High (15E/55Y)75%50% till 45 years → 35% by 55 yearsLife Cycle 50 – Moderate (10E/55Y)50%75% till 35 years → 15% by 55 yearsLife Cycle 25 – Low (5E/55Y)25%50% till 35 years → 10% by 55 yearsActive Choice25%25% till 35 years → 5% by 55 years

Maximum permissible allocation under Active Choice

Under the Active Choice, an NPS subscriber will have the flexibility to determine the allocation of contributions among the available asset classes, subject to the limits specified by the PFRDA.

Asset ClassMaximum Permissible AllocationEquity & related instruments (E)75%*Corporate Bonds (C)100%Government Securities (G)100%

*100% under Tier II

NPS Sanchay

Under NPS Sanchay, the maximum permissible asset allocation will be from 5% to 65%.

Asset ClassMaximum Permissible AllocationEquity & related instruments (E)25%Corporate Bonds (C)45%Government Securities (G)65%Short-term debt instruments10%Asset Backed, Trust Structured and Miscellaneous Investments5%

MSF scheme categories

MSF schemes will be classified into five categories depending on equity exposure from 0-100%.

CategoryCodeRisk LevelEquity ExposureAggressive GrowthAVery High Risk80%–100%High GrowthBHigh Risk60%–80%Balanced GrowthCMedium Risk35%–60%ConservativeDLow Risk10%–35%Debt (Govt./Corporate Bonds)EVery Low Risk0%–10%

The PFRDA said that every MSF scheme will have an equity exposure mandate corresponding to any one category. The pension body also said that a pension fund can voluntarily offer up to 2 schemes under each category under each Tier.

Standardising the names of MSF schemes

The PFRDA has also standardised the names of MSF schemes. The name must contain:

The name of every MSF Scheme shall follow the naming convention as under: Abbreviation of Pension Fund Name + “NPS” + MSF Category Code + Scheme Name

Schemes pertaining to Tier 2 shall mention Tier 2 at the end of the scheme name. Illustratively: • XYZ NPS A Retirement Scheme • XYZ NPS E Retirement Scheme Tier 2 . So instead of subscribers seeing a collection of different marketing-style names, the A/B/C/D/E code will immediately indicate the equity-risk category.

The pension body said that every scheme name will clearly indicate the applicable category code prescribed under the circular.

The PFRDA also said that pension funds should prominently disclose the relative equity exposure hierarchy, with Category A representing the highest and Category E the lowest equity exposure.

NPS scheme selection framework

The PFRDA says that all subscriber-facing interfaces, including CRA platforms and other onboarding channels should uniformly adopt the following sequence for presentation and selection of investment schemes.

a. Type of scheme (MSF/Lifecycle based/ Active choice/ NPS Sanchay/ 4A)

b. Category of the MSF Scheme/Lifecycle funds/ Asset allocation in case of Active choice

c. Selection of the pension fund

Information that NPS schemes should display

The pension body instructs that prior to the selection of a pension fund, all schemes being offered by the various pension funds under the selected category must display the following minimum information in such a way that the subscriber can easily compare amongst various schemes:

a. Scheme Name;

b. Pension Fund Name;

c. Date of Launch

d. Historical Returns;

e. Benchmark & comparative benchmark returns

f. Applicable Charges

g. Riskometer

h. Assets under Management (AUM) as on the last day of the previous month

i. Such other information as may be specified by the Authority from time to time.

A subscriber should then select the pension fund and the corresponding scheme, the PFRDA instructs. The PFRDA reveals that platforms owned and operated by PoPs may, for the purpose of onboarding subscribers, display the schemes offered by the pension fund(s) associated with such PoP.

Conditions for changing NPS scheme or pension fund

The circular says a subscriber can change between MSF, Lifecycle, Active Choice and Sanchay schemes, subject to the applicable rules. The conditions that the PFRDA has laid out while changing NPS schemes are as follows-

A PRAN is unique to a CRA and a subscriber can select multiple schemes under the same PRAN.

A subscriber can hold only one scheme among Lifecycle-based Scheme or Active Choice at a time under the same PRAN.

A subscriber can simultaneously hold investments in more than one MSF scheme.

A subscriber can submit a maximum of two requests per account for the change of pension fund, investment scheme or any combination of the two.

A request involving any of the above changes at a time will be treated as one request for the purpose of determining the limit for each financial year.

A subscriber can change, from one scheme to another, amongst the MSF, Lifecycle, Active and Sanchay Schemes. Such a change of the NPS scheme should not affect the vesting period or any other applicable conditions governing the account, which should be reckoned from the original date of the opening of the NPS account.

Merging of subscriber’s NPS schemes

If a subscriber has opted for multiple NPS schemes, they will get the option to merge a scheme into another scheme which is the target scheme.

After this, the investment so merged will be governed by the applicable provisions of the Target Scheme, including the rules relating to vesting, charges,

partial withdrawals, change of scheme and other applicable features or conditions.

Accordingly, the eligibility and limits applicable under the Target Scheme will apply to the subscriber in respect of the merged investment.