Major Change in NPS: Now, Entire Equity Investments Can Be Made Separately

NPS New Rules: The Pension Fund Regulatory Authority (PFRDA) has made significant changes to the rules of the Corporate NPS. Under the new provisions, employees will now be able to invest up to 100% in high-risk equity funds, taking advantage of the Multiple Scheme Framework. However, this investment will only apply to the additional amount that employees voluntarily choose to invest separately. Previously agreed employee and employer contributions will not be transferable to this new scheme.

Differences Between the Previous System and the New System

Under the old system, the company and employee jointly decided the contribution amount in the Corporate NPS. In some cases, only the employer invested. PFRDA has clarified that this jointly agreed contribution cannot be made part of the Multiple Scheme Framework. Employees with a risk appetite and seeking better returns can make additional contributions for a 100% equity investment.

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New Feature of Multiple Scheme Framework

Under the new system, which will come into effect from October 1st, non-government NPS members can choose multiple investment schemes within a single tier account. Previously, only one plan was allowed. Investors can now invest in both riskier equity funds and safer debt funds, with varying shares. This change allows investors to adopt a diversified investment strategy based on their risk appetite and return goals. The previous maximum equity investment limit was 75 percent, which has now been increased to 100 percent.

Employer and Employee Consent

The PFRDA has also mandated that the selection of pension funds and investment plans requires the joint consent of both employers and employees. Previously, in many companies, the employer was the sole decision maker regarding investment options. Now, every decision will be based on written consent, and a yearly review of the selected funds is mandatory.

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New Grievance Filing Mechanism

If an employee feels that a fund has been selected without their consent or consent, they will have the right to file a complaint. The grievance process will be completed in two stages. First, the employee must file a complaint with the HR department. If a resolution is not found, the matter can be taken directly to the PFRDA. This system will provide more transparency and security to the employees.