Several major changes to the National Pension Scheme (NPS) rules came into effect today, October 1st. Subscribers can now invest their entire corpus (100%) in equities, up from the previous 75%. This change is part of the new multiple scheme framework.

Finance Minister Nirmala Sitharaman made this historic announcement on the occasion of NPS Day in New Delhi, emphasizing the need for inflation-linked benefits in pensions to ensure financial sustainability and a useful retirement plan. The Finance Minister stated that pensions should include inflation-linked benefits to provide financial security for retirement, as pensions are crucial for old age.

NPS’s Outstanding Performance and High Returns

The Finance Minister highlighted that the NPS has delivered excellent returns since its inception. Equity schemes have generated an average annual return of 13%. Furthermore, corporate debt and government bond schemes have generated a return of 9%.

This return is higher than other schemes available in the market. She stated that a strong pension system provides stability to families, reduces pressure on youth, and encourages investment in priority sectors. India’s pension sector is now fully strengthened.

Rules to be simplified for gig and platform workers

Nirmala Sitharaman called for simplifying the rules for including gig and platform workers in pension schemes. She stated that the process for gig workers to join the NPS should be simplified, as today’s workforce includes entrepreneurs and gig workers who require flexible retirement plans. He described the affordable cost of NPS as suitable for gig workers.

The minimum annual contribution to NPS is ₹1,000, which is suitable for gig workers with unstable incomes. He said that as we move towards a developed India by 2047, every citizen can achieve financial dignity in old age through a pension.

PFRDA’s New Initiatives and Concerns Over Low Pension Savings

Pension Fund Regulatory and Development Authority (PFRDA) Chairman S. Raman said that the regulator has introduced a “multiple scheme structure,” which provides greater flexibility in withdrawals. He also informed that as of August 31, NPS had 90 million subscribers and assets under management (AUM) of ₹15.58 lakh crore.

However, the Secretary of the Department of Financial Services (DFS) expressed concern that the share of pension savings in people’s total financial savings is still very low. Much remains to be done to reach pension saturation in India. According to the latest data, the Atal Pension Yojana (APY) has 82.5 million subscribers and an AUM of ₹47,971 crore.