A new rival to mutual funds? NPS reform opens 100% equity, early-exit plans for seniors

The National Pension System (NPS) has entered a new chapter of flexibility and choice with the rollout of the Multiple Scheme Framework (MSF) by the Pension Fund Regulatory and Development Authority (PFRDA). 

The reform allows investors to align pension savings with personal financial goals — introducing multiple investment tiers, earlier exit options, and equity exposure of up to 100%.

Under the MSF, non-government subscribers can now choose between low-, moderate-, and high-risk options, breaking away from the traditional uniform model. The framework redefines how NPS operates — offering customisation, goal-based allocation, and market-linked performance comparable to modern investment funds.

A key change is exit flexibility. Subscribers are no longer bound to wait until the age of 60; they can now withdraw after 15 years of vesting, syncing redemptions with milestones such as a child’s education, home purchase, or early retirement. The cost structure, capped at 0.30% of Assets Under Management (AUM), is marginally higher than before but justified by greater flexibility and transparency.

The MSF has also opened the door for pension funds to design differentiated products. Several leading managers have introduced new schemes under this framework, each catering to a distinct investor profile:

• HDFC Pension Fund has created three variants — an income fund focused on moderate growth (50–75% equity), a debt-heavy version with up to 100% corporate debt, and an aggressive equity fund allowing 80–100% equity exposure.
• Axis Pension Fund’s “Golden Years Growth Fund” follows a long-term equity strategy with 65–100% in stocks, balancing it with limited exposure to debt (
• ICICI Prudential Pension Fund has launched a hybrid plan combining 50–80% equity with debt under 50%, designed to balance growth and income.
• Kotak Mahindra Pension Fund has positioned its “Kuber Equity Fund” as a long-term, high-growth plan with 80–100% equity and minimal debt (

Experts say this diversification marks a structural shift — from a rigid pension system to a market-driven ecosystem where investors can personalise their retirement strategy. Younger subscribers can now opt for higher-risk, high-equity portfolios, while older participants can remain in stable, debt-focused plans.

Tax treatment under the MSF remains investor-friendly. 20% of the corpus will be annuitised to ensure steady income, 20% can be withdrawn as a taxable lump sum, and 60% will remain tax-free.

Financial planners see this as a breakthrough in India’s pension evolution — blending flexibility, transparency, and risk-based customisation. The MSF is expected to draw a new generation of savers to long-term investing by making pensions not just mandatory savings, but strategic wealth-building tools.