NPS vs MSF 2026: Which Investment Option Offers Better Returns?

NPS vs MSF: Interest in the National Pension System (NPS) is on the rise. Particularly following recent significant changes, the scheme has become even more appealing. If you’re considering investing in NPS, Moneycontrol is providing some key information about it. This will assist you in gaining a better understanding of this retirement scheme.

There are two options available: the Common Scheme and the MSF

The National Pension System (NPS) features two unique structures: the traditional Common Scheme and the newly introduced Multiple Scheme Framework (MSF). The investment process in the Common NPS scheme is straightforward and consistent for all investors. Subscribers can choose only one scheme per tier and determine their investment pattern within the fund. This can be accomplished in two different ways.

Understanding the Difference between Active Choice and Auto Choice

With Active Choice, the investor has the freedom to decide how much to allocate to equities (shares), corporate bonds, and government securities (like government bonds). This choice is influenced by the investor’s risk appetite. In contrast, Auto Choice allocates investments based on pre-set life-cycle options, such as Life Cycle 25, Life Cycle 50, or Life Cycle 75. This implies that when the investor is younger, a larger portion of their funds is directed towards equities. As they age, the proportion allocated to equities diminishes.

Advantages of a Balanced Life Cycle

Investors can also opt for a balanced life-cycle fund, investing the entire corpus in government securities. This choice is ideal for those who are risk-averse. “Given that this structure is fixed and offers limited options, it is perfect for investors seeking a long-term retirement plan with minimal fluctuations,” stated Pranay Ranjan Dwivedi, MD and CEO of SBI Pension Fund. The common scheme imposes a 75% equity allocation limit, which reduces as the investor grows older.

Investor-wise schemes under MSF

MSF allows pension funds to offer different schemes for different subscribers. For example, pension funds can offer different schemes for women, gig workers, self-employed and other investors, based on the investor’s profile. “Earlier, there was no facility to offer such different schemes under a common scheme. MSF offers multiple schemes under one PRAN,” Dwivedi said.

16 options available under MSF

Approximately 16 schemes are available under MSF. This gives investors multiple investment options under a single PRAN. Aditya Birla Sun Life Pension offers Secure Retirement Equity Fund and Secure Future. Axis Pension Fund offers Golden Years Fund-Growth. DSP Pension Fund offers Long Term Equity Fund. These are just examples. Other funds also offer similar schemes.

Which option is more suitable for you?

One of the key benefits of MSF is its 15-year minimum vesting period. This offers considerable ease for investors, particularly those who are younger. According to experts, MSF grants more freedom to NPS subscribers. Nonetheless, both the traditional and MSF schemes are designed to help investors accumulate a substantial corpus over time. The common scheme is ideal for subscribers seeking a straightforward option. In contrast, MSF is more appropriate for those who need increased flexibility and a shorter investment duration.