You can now invest 100% in equities under NPS
What's the story
The National Pension System (NPS) has launched a new multiple scheme framework, allowing subscribers to allocate their entire portfolio to equities. The change, effective from October 1, was announced by Finance Minister Nirmala Sitharaman on the occasion of 'NPS Diwas' in New Delhi. Earlier, the maximum allocation limit for equities was capped at 75%.
Inflation focus
Sitharaman emphasizes inflation-linked benefits in pension products
Sitharaman stressed the need for pension products to offer inflation-linked benefits, saying "inflation benefits should be there in pension so that pension remains fiscally sustainable." She highlighted the importance of pensions for old age and their role in social and economic stability. The minister also pointed out that NPS has provided high returns since its inception with an average annual return of 13% for equity schemes.
Gig inclusion
Simplifying norms for gig and platform workers
Sitharaman also called for simplifying norms to include gig and platform workers in the pension net. She said, "The NPS onboarding requirement should be made simpler for gig workers," adding that today's workforce is characterized by entrepreneurs and gig workers who need a portable flexible retirement plan. The minister stressed that the affordability of NPS makes it suitable for those with fluctuating incomes.
New framework
Introduction of Multiple Scheme Framework (MSF)
The Pension Fund Regulatory and Development Authority (PFRDA) has also introduced the Multiple Scheme Framework (MSF) under Section 20(2) of the PFRDA Act, 2013. The reform allows subscribers to access and manage multiple schemes under a single Permanent Account Number (PAN). This change is expected to provide greater diversification and personalization for corporate employees, professionals, self-employed individuals, and gig economy workers.
Scheme details
Charges and incentives for pension funds
The MSF also allows subscribers to choose between moderate and high-risk variants, with up to 100% equity in high-risk. A standardized naming convention has been introduced for these schemes, which must include 'NPS + objective.' The charges for these schemes are capped at 0.30% of Assets Under Management (AUM) annually, with an additional incentive of 0.10% to Pension Funds (PFs) if 80% of their subscribers are new within three years or till they reach 50 lakh enrollments.