NPS Update: The Pension Fund Regulatory and Development Authority (PFRDA) has changed the investment rules for millions of employees covered under the Corporate NPS. This unprecedented change now gives employees extraordinary freedom to invest up to 100% in high-risk, high-return equity funds.
Under this ‘Multiple Scheme Framework,’ employees can take advantage of this tremendous option by making a voluntary contribution separate from their basic corporate contribution. This Google Search-friendly content will explain how this new rule works, why consents are required, and how it can help your retirement fund grow faster.
New Freedom of Investment Options
The PFRDA has allowed non-government members, including corporate employees, to invest in multiple schemes simultaneously, effective October 1. Previously, investors were only allowed to choose one scheme per tier account.
Under the new system, investors can now invest up to 100% in equities. Previously, this limit was 75%. This option is a golden opportunity for investors willing to take on more risk for higher returns. Investors can now invest simultaneously in various schemes, including higher-risk equity plans and safer debt fund plans.
Corporate Contribution Rules
Under current rules, contributions to the Corporate NPS are jointly decided between the employer (company) and the employee. The PFRDA has clarified that the agreed contribution between the company and the employee cannot be transferred to a 100% equity scheme under the Multiple Scheme Framework. If the employee wishes to invest in 100% equity funds, they must make this additional contribution separately and voluntarily.
Written Consent and Annual Review Rule
Under the new rules, the selection of pension funds and investment plans will now be decided jointly by the employer and employee. This is a major change.
Previously, in many companies, this decision was made solely by the employer, but now mutual consent between both parties will be mandatory.
This decision must be put in writing. This ensures transparency and avoids future disputes.
An annual review of the selected funds will also be conducted to ensure that the investment is in line with the employee’s risk profile and goals.
Employee Grievance Redressal Process
PFRDA has also ensured that employees have a robust process for filing complaints if they disagree with or are ignored in the fund selection. A two-stage process has been established for this purpose. Employees should first complain to their HR department. If the issue is not satisfactorily resolved at that level, employees can proceed directly to file a complaint with the PFRDA. This process ensures the protection of employees’ interests.