The National Pension System (NPS) has long been a trusted retirement planning tool in India—but it also came with rigid rules. Limited equity exposure, a long lock-in until age 60, and fewer customization options often made investors look elsewhere for growth.
That’s changing now.
The Pension Fund Regulatory and Development Authority (PFRDA) has introduced a major reform called the Multiple Scheme Framework (MSF). With the new NPS rules, investors can now access up to 100% equity exposure and even exit after 15 years, making NPS far more flexible and growth-oriented.
In this blog, we explain the new NPS 100% equity option, early exit rules, tax implications, and how investors can use MSF smartly for long-term wealth creation.
What Is the Multiple Scheme Framework (MSF) in NPS?
The Multiple Scheme Framework (MSF) is a new structure under NPS that allows pension fund managers to design custom investment schemes instead of following one rigid allocation model.
Why MSF Matters
Under MSF, NPS shifts from being a “one-size-fits-all” retirement product to a flexible investment platform that can cater to different risk profiles, goals, and life stages.
Also Read: What is National Pension Scheme (NPS)
The Biggest Change: New NPS Rule Now Allows 100% Equity Investment
Earlier, NPS capped equity exposure—especially for older investors. Under the new NPS rules, this restriction has been relaxed within MSF schemes.
What’s New?
- Fund managers can now offer schemes with up to 100% equity exposure
- No mandatory allocation to government bonds in some schemes
- Designed especially for young and aggressive investors
Examples of New NPS Equity Schemes
Some pension funds have already launched high-equity MSF options:
- Kotak PF NPS Kuber Equity Fund
- Equity allocation: 80%–100%
- No exposure to government securities
- Equity allocation: 80%–100%
- UTI PF Wealth Builder
- Equity allocation: 90%–100%
- Focus on mid-cap and growth stocks
- Equity allocation: 90%–100%
- HDFC PF NPS Equity Advantage Fund
- Equity allocation: 80%–100%
- Growth-oriented equity strategy
- Equity allocation: 80%–100%
Investor insight: These schemes position NPS as a serious long-term alternative to equity mutual funds—especially for disciplined investors.
NPS MSF Schemes for Every Risk Profile
The MSF framework is not just about aggressive equity investing. It allows fund houses to create goal-based and risk-based NPS schemes.
For Balanced Investors
- ICICI PF NPS My Family My Future Plan
- Equity: 50%–85%
- Remaining allocation in government securities
- Equity: 50%–85%
For Conservative Investors
- HDFC PF Surakshit Income Fund
- Equity capped at 25%
- 50%–100% allocation to debt instruments
- Equity capped at 25%
For Value-Oriented Investors
- DSP PF NPS Long-Term Equity Fund
- Up to 100% equity
- Follows a value investing philosophy
- Up to 100% equity
Key takeaway: With MSF, NPS can now match an investor’s risk appetite instead of forcing a predefined structure.
New NPS Exit Rules: You Don’t Have to Wait Till 60
One of the most criticised aspects of NPS was its long lock-in period. The MSF framework directly addresses this.
Minimum Vesting Period Under MSF
- Early exit allowed after 15 years
- No need to wait until age 60
Why This Is a Game Changer
This flexibility allows NPS to be used for:
- Children’s higher education
- Buying a house
- Mid-career financial freedom
- Early retirement planning
NPS is no longer just about old-age income—it can now support mid-life financial goals.
NPS Withdrawal Rules Explained: The 20-20-60 Formula
When you exit an MSF scheme after 15 years, withdrawals follow a specific structure:
The New NPS Withdrawal Breakdown
- 20% → Mandatory annuity (regular pension income)
- 20% → Taxable lump sum
- 60% → Tax-free lump sum
What This Means for Investors
- Majority of your corpus (60%) remains completely tax-free
- Partial annuity ensures long-term income security
- Offers more liquidity compared to traditional NPS exit rules
Costs, Switching & Other Important Rules
Expense Ratio
- Capped at 0.30% of AUM
- Slightly higher than traditional NPS, but far cheaper than mutual funds
Switching Rules
- You can move from MSF back to traditional NPS
- You cannot switch between different MSF schemes
Account Independence
- MSF schemes operate independently
- Exiting or maturing an MSF scheme does not affect your regular NPS account
Key Takeaways: New NPS Rules at a Glance
- NPS now allows up to 100% equity investment under MSF
- Investors can exit after 15 years, not just at 60
- Multiple schemes available for aggressive, balanced, and conservative investors
- Withdrawal follows the 20% annuity, 20% taxable, 60% tax-free structure
- Low cost makes NPS a strong long-term wealth creation tool
Conclusion: Is NPS the New Mutual Fund Alternative?
The new NPS rules under the Multiple Scheme Framework fundamentally change how investors should look at NPS. With 100% equity options, early exit flexibility, and low costs, NPS is no longer just a rigid pension product—it’s evolving into a powerful long-term investment vehicle.
For investors with a 15-year horizon or more, NPS now competes directly with equity mutual funds, while still offering tax efficiency and retirement discipline. Used correctly, MSF can significantly strengthen a long-term financial plan.
FAQs: New NPS Rules and MSF Explained
MSF allows pension fund managers to launch customized NPS schemes with varying equity and debt allocations, including up to 100% equity.
Yes. Under the new NPS rules and MSF, certain schemes allow up to 100% equity exposure.
You can exit an MSF scheme after 15 years, unlike traditional NPS which requires waiting until 60.
On exit, 20% must go into an annuity, 20% is taxable as lump sum, and 60% is tax-free.
No. The expense ratio is capped at 0.30%, which is far lower than most equity mutual funds.
No. You can only move back to traditional NPS, not between MSF schemes.
Yes. With high equity exposure, long time horizons, and low costs, NPS under MSF is especially attractive for young investors.
Disclaimer: Investments in securities markets are subject to market risks. Read all the related documents carefully before investing. The securities quoted are exemplary and are not recommendatory.
