If you’ve chosen the NPS route for your retirement savings, the recent change to the National Pension System (NPS) that took effect on 1st October 2025, is a significant empowerment for most. This change gives future retirees more control, enabling them to achieve better diversification and a higher probability of not outliving their retirement funds.
The new change to the National Pension System is called the Multi-scheme framework. To put it simply, you can now spread your NPS investments across multiple pension fund managers (PFMs) under a single PRAN number. Earlier, you could only select one fund manager for all asset classes.
What is the Multi-Scheme Framework for NPS?
The first thing to keep in mind is that the Multi-scheme framework (MSF) is intended only for Private sector employees and Independent professionals who make independent contributions to the NPS. Though the new system does not apply to Employer NPS (where the employer also contributes) for government employees, it still applies to private-sector employees.
The key differentiator of the new system is that it allows subscribers to hold multiple investment schemes across different pension fund managers under a specific PRAN number. The facility is available regardless of the type of account you hold (Tier 1 or 2) or the investing method you have opted for (auto or active).
Under the old setup, investors using the “active choice” mode had to pick one pension fund manager – say, Axis Pension Fund – for all assets.
Now, under the MSF, you can mix and match. For instance:
- Choose Axis Pension Fund for equities,
- Birla Pension Fund for corporate debt, and
- DSP Pension Fund for government bonds.
This flexibility enables you to design a diversified, risk-adjusted portfolio that better reflects your financial goals and market view.
It not only allows you to diversify your retirement savings more effectively, but also gives you the option to manage risk more effectively and generate higher risk-adjusted returns.
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Comparing the key features: Old vs New NPS
While the new MSF NPS offers more flexibility and choice in executing your retirement plan, it’s crucial to review the finer details before deciding to make changes to your NPS account. This flexibility empowers you to tailor your retirement portfolio more precisely according to your risk tolerance and financial Planning goals.
| Feature | Earlier NPS option | New MSF NPS |
| Number of Schemes per PRAN | One fund manager only | Multiple PFMs under one PRAN |
| Scheme Allocation | 100% to a single scheme | Split the contribution among schemes |
| Equity allocation limit | Usually capped at 75% in active choice | Up to 100% in equity |
| Switching between schemes | Limited to a single PFM or model | No switch between MSF schemes for 15 years |
| Vesting / Lock-in period | Upto retirement | 15-year lock-in for switching |
| Corpus transfer | Allowed between PFMs | Old corpus not transferable to MSF |
| Applicability | Govt, / Non Govt | Non-Government ( Private / Corporate) |
| Tranperancy | NAV, risk, and benchmark are shown for the selected scheme only | Scheme-wise NAV, risk metrics, and benchmarks for each selected scheme |
| Employer Contribution (Corporate) | Follows the employee’s single scheme choice | Employer and employee can allocate to multiple schemes as per their choice |
What This Means for Your Retirement Planning
The new MSF NPS offers investors greater flexibility to tailor their retirement portfolio to their risk tolerance. Having multiple schemes in the retirement portfolio offers better diversification. With greater equity exposure, it can lead to higher returns, offering a ray of hope for investors aiming to optimize retirement wealth creation.
However, the 15-year vesting period, which restricts switching between MSF schemes during this time, encourages disciplined, long-term investing. It reinforces the NPS’s retirement focus, making it a suitable option for investors who are comfortable with the commitment required for long-term investing. Investors content with the old scheme’s simplicity and moderate equity exposure need not switch, as typical schemes remain available.
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Judgment: Is the New NPS Rule Better for Retirement Planning?
For most investors, especially those seeking higher growth potential and portfolio customization, the new MSF is a substantial improvement. Even if you have opted for the auto-choice option in your NPS account, the new MSF offers greater freedom than the previous one.
Overall, the MSF is a progressive step toward aligning NPS with global best practices in retirement planning, making it a better choice for informed investors aiming for optimized retirement wealth creation.
NS Wealth is a Certified Financial Planner firm in India, serving clients across all major metro cities — including Delhi, Mumbai, Pune, Bangalore, Kolkata, Hyderabad, Chennai, and Bhubaneshwar.
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