NPS gets major overhaul: 100% equity option, shorter lock-ins, more choice

The National Pension System (NPS) is getting a serious upgrade starting October 1, 2025, giving retail investors more flexibility and control over their retirement savings. The new changes allow 100% equity exposure, introduce multiple scheme options, and shorten the vesting period to just 15 years. 

 

Under the new regime, the old “common schemes” stay, but now “new schemes” can be launched by pension funds with different risk profiles: moderate (partial equity) and high-risk (full equity). 

 

 Investors can now also hold multiple pension schemes under a single PAN (across different CRAs) and mix conservative and aggressive strategies.

 

Perhaps the most user-friendly change is the vesting period reduction: earlier, you needed to wait until age 60 to exit under the normal rules, but the new minimum vesting is just 15 years, making NPS much more accessible to younger and mid-career investors.

 

What These Changes Mean for You

 

Higher growth potential

With a 100% equity option, younger investors with long investment horizons can fully exploit market returns. But of course, more equity means more risk—so the high-risk scheme is more suited if you’re comfortable with volatility.

 

"Pension funds are required to launch the new schemes in two risk-based variants—moderate and high. The high-risk option allows full equity exposure. They can also launch low-risk schemes at their discretion. 

 

The 100 per cent equity option could appeal to younger investors with a long investment horizon who want more growth from equities," said Value Research in a note.

 

Better diversification & personalization

Being able to hold multiple schemes means you can split your NPS corpus between safer and aggressive paths. For example, you could channel part into a conservative scheme (for stability) and part into high-equity for growth.

 

"Until now, NPS subscribers could hold just one investment option per tier under one central record-keeping agency (CRA) such as Protean, CAMS and KFintech. That was restrictive since you had to choose a single strategy. Pension funds, too, could offer only one scheme per asset class.

 

The new Multiple Scheme Framework (MSF) changes this. Now, your PAN will be the unique identifier, and you can hold multiple pension schemes with different permanent retirement account numbers (PRAN) across CRAs," said Value Research in a note.

 

Earlier liquidity

The 15-year minimum vesting means you can exit earlier than ever before under certain conditions. That’s good news if you start NPS in your 20s or 30s and want flexibility later. 

New schemes can be tailored by age and occupation

Pension funds now have the flexibility to tailor schemes by the age and occupation of subscribers. 

 

"For instance, they can customise the new schemes for self-employed professionals, gig-economy workers or corporate employees. This allows for more customised retirement solutions suited to specific needs," noted Value Research.

 

New proposals on exit rules (under discussion)

The PFRDA has floated draft proposals to further improve flexibility:

 

• Allowing up to 80% lump sum withdrawal at exit (instead of the current 60%) 
• Reducing the mandatory annuity portion from 40% to 20%
• Raising the maximum entry age beyond 70 and extending continuation beyond existing limits 

 

Things to Watch Out For & Smart Tips

 

Don’t jump into 100% equity just because it's new—check your risk appetite, time horizon, and the volatility you can stomach.

 

Mix & match: Use the multi-scheme option to balance your portfolio between conservative and aggressive routes.

 

Keep an eye on final rules: The proposals are drafts now, and the annuity/lump-sum changes might get tweaked.

 

Even with better flexibility, NPS is still a long-term investment—treat it as part of your retirement foundation, not a quick gain tool.