NPS Scheme Merged: The Pension Fund Regulatory and Development Authority (PFRDA) has made an important announcement for Tier-I subscribers of the National Pension System (NPS). Subscribers who had previously opted for Scheme A are now proposed to merge it with Schemes C and E. This move will modernize the investment structure and make managing retirement savings more efficient.
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NPS Scheme Merged: The Pension Fund Regulatory and Development Authority (PFRDA) has made an important announcement for Tier-I subscribers of the National Pension System (NPS). The PFRDA stated that for subscribers who had chosen Scheme A in Tier-I (Active Choice), it is now proposed to merge Scheme A with Schemes C and E. This move aims to modernize the NPS investment structure and manage subscribers’ retirement savings in a more efficient, diversified, and future-proof manner.
Reasons for Merging Scheme A
During a review of Scheme A’s performance and structure, the PFRDA observed certain limitations. Scheme A’s corpus was relatively small and its investment options were limited, impacting diversification and flexibility. According to the PFRDA, merging Scheme A with Schemes C and E will now invest subscribers’ contributions in a larger and more diversified portfolio, enabling better management in line with long-term retirement goals.
Key Benefits for Subscribers
Diversification and Stability – Instead of Scheme A, which has a small corpus and limited investment options, subscribers’ funds will now be placed in a larger and diversified portfolio, reducing investment risk and increasing stability.
Better Risk-Adjusted Returns – Portfolio management is more efficient in larger schemes, resulting in consistent returns and a better risk-benefit balance over the long term.
Higher Liquidity and Flexibility – Some investments in Scheme A had long lock-in periods. After the merger, subscribers will enjoy higher liquidity and easier withdrawal and scheme switching.
Conformance with Modern Market Practices – India’s investment landscape is rapidly changing. This move by PFRDA will keep NPS in line with these changes and SEBI regulations.
Subscribers and Investment Options
Subscribers in Scheme A will be able to invest their funds in other asset classes without additional costs until December 25, 2025. Investment options under NPS are: equity (E), corporate bonds (C), government securities (G), and alternative assets (A).
Scheme A primarily invests in alternative investment options such as CMBS, MBS, REITs, and InvITs. Recently, the Public Sector Undertaking (PFRDA) approved NPS reforms, which include expanding investment options, promoting diversification, and creating a more efficient investment structure.
