Now Reading: NPS subscribers can now invest in 100% equity schemes from 2025
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NPS subscribers can now invest in 100% equity schemes from 2025
The National Pension System now allows non-government subscribers to invest in schemes with up to 100% equity exposure under the Multiple Scheme Framework (MSF), effective from 2025. Earlier, the Active Choice option…
The National Pension System now allows non-government subscribers to invest in schemes with up to 100% equity exposure under the Multiple Scheme Framework (MSF), effective from 2025. Earlier, the Active Choice option capped equity investments at 75%.
Under MSF, pension fund managers can launch high-risk schemes that invest entirely in equities. Investors can hold multiple schemes under one Permanent Retirement Account Number (PRAN), allocating different contribution shares to equity, government securities, or corporate bonds.
The 100% equity option carries higher market risk and is suited for younger investors with a long horizon until retirement. Fund management fees for MSF schemes can go up to 0.30% of AUM, compared to about 0.09% for common schemes. Each scheme has a minimum vesting period of 15 years or until the subscriber turns 60, whichever is earlier.
Indian Opinion Analysis
The MSF shift gives non-government NPS subscribers a flexibility previously available only to government employees through the Active Choice route, but the higher equity cap also removes the auto-rebalancing safeguard of the default lifecycle fund. Under the Pension Fund Regulatory and Development Authority's framework, investors must actively manage their asset allocation as they age, since the scheme does not automatically reduce equity exposure. The fee difference, though small in percentage terms, compounds significantly over a 15-to-30-year horizon and directly eats into the final corpus. The practical test will be how many subscribers actually monitor their allocation annually and rebalance, something most retail investors under auto-pilot defaults have not had to do.
Source: livemint.com
This story was synthesised by AI from the source linked above.
