The new framework gives pension funds the freedom to create their own schemes, thereby offering more flexibility and options for subscribers
New Delhi: India’s National Pension System (NPS) has emerged as a high-performing and cost-effective retirement planning tool, delivering over 13 per cent average annual returns in its equity schemes since inception, Finance Minister Nirmala Sitharaman said while addressing the NPS Diwas conference on ‘Inclusive Pensions, Innovative Solutions: Strengthening Retirement Security in India’ organized by Pension Fund Regulatory and Development Authority (PFRDA) in New Delhi.
Other investment options under NPS have also posted robust long-term returns: around 9 per cent annually for both corporate debt and government securities schemes, making NPS one of the most attractive pension products in the world.
“The schemes under NPS have generated attractive returns. The average annual returns since inception under the equity scheme have been over 13 per cent, and around 9 per cent for both Corporate Debt and Government Securities schemes,” Sitharaman said.
The minister emphasized that these strong returns, combined with the system’s low cost, portability, and flexibility, make NPS a cornerstone of retirement security for all Indians, not just government employees.
Introduced in 2004 by the then NDA government, NPS marked a crucial shift from a defined-benefit (DB) model to a defined-contribution (DC) framework, making pension planning more sustainable.
What began as a reform for government employees has now evolved into a universal retirement tool, accessible to all citizens, including the private sector and self-employed individuals.
“NPS transformed retirement planning from a government-sector privilege into a universal tool for financial security,” Sitharaman added.
NPS is also among the lowest-cost pension fund management schemes globally. The low charges ensure that more of the subscriber’s money stays invested and compounds over time. Moreover, its structure is regulated, transparent, and designed for seamless mobility.
“Whether there’s a job change, relocation, or transition to self-employment, the pension account remains the same,” said the Finance Minister. “NPS offers flexibility and choice.”
A subscriber can keep their NPS account active with a minimum annual contribution of just Rs 1,000, and monthly contributions are not mandatory, offering flexibility that caters to informal and gig economy workers as well.
In 2024, the NPS platform was upgraded to enhance the Direct Remittance (D-Remit) facility, allowing subscribers to receive same-day Net Asset Value (NAV) for their contributions. This prevents loss of potential market gains due to processing delays–especially crucial in fast-moving markets.
“This eliminates the risk of losing out on potential gains due to processing delays in a rising market,” Sitharaman said.
As India targets becoming a developed nation by 2047, a secure, pensioned society is seen as essential. NPS helps relieve financial pressure on younger generations and ensures dignified aging for senior citizens.
“As India moves with purpose toward Viksit Bharat @ 2047, every citizen can envision financial dignity in old age,” said the Finance Minister, adding that pensions provide a sense of security in old age. They strengthen households, ease pressure on working-age children, and channel long-term savings into national priorities.
New framework gives pension funds the freedom to create their own schemes
The NPS has received strong support from industry experts, who said that the reforms introduced by the Pension Fund Regulatory and Development Authority (PFRDA) are progressive and will help expand the reach of retirement savings in India.
On the occasion of NPS Diwas, which coincides with the International Day for Older Persons, the Multiple Scheme Framework (MSF) was formally launched.
Experts highlighted that the new framework gives pension funds the freedom to create their own schemes, thereby offering more flexibility and options for subscribers.
Speaking to ANI, Axis Pension Fund CEO Sumit Shukla described the day as a “big day for NPS” and underlined that the MSF scheme marks a major milestone for the sector.
“Today is NPS Diwas, and we are launching this MSF scheme, which allows all pension funds to create their own schemes. As Axis, we are also launching a new scheme for the subscriber. This is the first time pension funds have been allowed to launch a scheme. It will provide significant value to the customer,” he said.
Shukla explained that the new scheme permits 100 per cent equity allocation for the first time, with a 15-year lock-in period, offering subscribers greater flexibility and long-term benefits.
“The pension industry is poised to grow significantly from here and become a much larger industry than it is today. The new products that have arrived will help us expand and attract new customers,” he added.
He also noted that customisation of products for children, women, and big workers will now be possible. While praising PFRDA for “changing the landscape completely,” he emphasized the need for additional tax incentives.
“If we can get 50,000 rupees as a tax benefit in the new tax regime, it will be great,” he said.
Echoing similar sentiments, HDFC Pension MD & CEO Sriram Iyer said that the launch of the Multiple Scheme Framework was a momentous development for the sector.
He stressed that the progressive steps taken by PFRDA would help expand the reach of NPS to wider segments of the population.
“HDFC Pension, as the largest private sector pension fund manager and also the largest corporate NPS point of presence, is very excited to bring about a set of schemes that will help expand the reach of NPS 2. We are focused on two broad product segments and will launch more products. We are also coming up with a product which is going to have a 100 per cent exposure to equity, best suited for individuals of the younger age group or those with a high risk appetite,” he said.
Experts believe that with the new reforms, NPS is set to become a stronger and more inclusive system, offering Indians more options for a secure and happy retirement.
Meanwhile,the PFRDA has released a detailed Consultation Paper titled “Enhancing the National Pension System: Proposals for Flexible, Assured and Predictable Pension Schemes”, inviting stakeholders across sectors to provide feedback on proposed reforms aimed at strengthening the National Pension System (NPS).
Dated September 30, 2025, the paper outlines three innovative pension scheme options under the NPS framework designed to offer subscribers greater flexibility, assurance, and predictability in their post-retirement income, as added in a release by the Ministry of Finance.
The first option, Pension Scheme-1 (Non-Assured, Flexible Decumulation), emphasizes wealth maximization by combining a Step-up Systematic Withdrawal Plan (SWP) with an annuity. This hybrid approach allows subscribers to benefit from both planned withdrawals and guaranteed income, offering flexibility in managing retirement funds.
Pension Scheme-2 (Assured Benefit) targets subscribers seeking assured pension payouts. This scheme aims to provide a Target Pension that is periodically adjusted for inflation, based on the Consumer Price Index for Industrial Workers (CPI-IW). This ensures that the pension keeps pace with rising living costs, offering financial security and predictability.
The third option, Pension Scheme-3 (Assured through Pension Credits), introduces the novel concept of “Pension Credits.” Each credit represents a fixed monthly pension payout, providing subscribers with a transparent, goal-oriented framework that enhances predictability and engagement in planning their retirement income.
All feedback should be submitted using the Feedback Template included within the consultation paper by October 31, 2025, the Finance Ministry added.