NPS New Rules: The Pension Fund Regulatory and Development Authority (PFRDA) has made significant changes to the National Pension System (NPS) for corporate employers and employees. The new rules aim to promote greater transparency and partnership in pension fund selection and investment options. The main goal of these guidelines is to create a robust framework focused on long-term investment strategies.
Corporate NPS Model Revamped
Under the Corporate NPS model, employers open pension fund accounts for their employees and can contribute jointly. The previously issued rules were to come into effect in September 2025, but the revised guidelines now give companies two options: they can adopt a joint contribution model or choose an employer-only contribution model. This change also gives employees the freedom to make voluntary additional contributions based on their risk appetite.
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An agreement is required for pension fund selection
The circular issued on November 7, 2025, states that decisions regarding pension fund selection and asset allocation will be made with the consent of both management and employees. The initial selection of the pension fund will be submitted for review each year. Any changes can only be made under mutually agreed conditions, with the fund’s long-term performance prioritized. The PFRDA clearly states that investment decisions should not be influenced by short-term market fluctuations.
Increased Contributions for Employees
The circular clarifies that employees can make voluntary contributions under the Multiple Scheme Framework (MSF) of the NPS. Various investment options will be available depending on their risk appetite and investment objective. If an employee has a complaint regarding fund selection, they should first contact their human resources department, and if a resolution is not found, the complaint can be escalated. Companies may, if they wish, allow employees to choose their investment options independently, even without mutual consent.
What is the impact of the new rules?
According to the PFRDA, the primary objective of these new guidelines is to enhance transparency in the NPS and make pension management in the corporate sector more structured and secure. Annual reviews, mutual settlements, and employee-centric investment options will not only strengthen retirement planning but also increase employees’ financial literacy and participation in investment decisions. These reforms are an important step towards building a more informed and financially secure workforce.