NPS Changes Ahead: New Payout Options, Banks Eye Pension Fund Role, Health Cover On Cards, And More

The Pension Fund Regulatory and Development Authority (PFRDA) is set to change the pension landscape in India. Several recent initiatives reflect the intention of transforming the National Pension System (NPS) from an accumulation tool to a smart income stream and providing a comprehensive solution. 

PFRDA chairman S. Ramann said on February 13, 2026, that PFRDA is designing the product so that it can provide post-retirement income security along with health coverage. The idea is to shift from a low yield annuities to flexible and market-linked payout options, he said.

Recently, NPS has been extended to gig and platform workers as well. On October 29, 2025, PFRDA launched the NPS e-Shramik model, catering to their needs by making an NPS model, especially for them.

Although NPS is a flexible scheme, its mandatory 40 per cent annuity feature at the time of retirement has been an undesirable feature. PFRDA addressed it recently by allowing only 20 per cent as a mandatory annuity and the remaining 80 per cent withdrawable in a lump sum. However, in addition to it, PFRDA is also designing post-retirement income products that can outperform conventional annuities and provide double-digit returns sustainably.

However, the most anticipated innovation in NPS is the Minimum Assured Return Scheme. As risk tolerance reduces with age, an assured income stream for a lifetime is something much-needed for those having no pension security otherwise. In this regard, PFRDA has proposed a minimum assured return scheme and constituted an expert committee to develop regulations.

Its Multiple Scheme Framework (MSF), which permits non-government subscribers a 100 per cent exposure in equities under various schemes, has been receiving a good response since its launch in October, 2025.

Additionally, the pilot launch of the NPS Swasthya Pension Scheme in January this year is aimed at integrating pension savings with healthcare. This would secure subscribers against medical emergencies, and potentially at a lower insurance cost.

Some of the other measures under consideration include using UPI apps in the system for easier onboarding of potential subscribers, especially the self-employed.

To strengthen the outreach for non-government subscribers, PFRDA has revamped its distribution incentives for MSF, too. For instance, the annual charges are higher in MSF, 0.30 per cent of the asset under management (AUM), compared to the common schemes, where it can be a maximum of 0.09 per cent. This change is to encourage intermediaries like banks to leverage their extensive network and client base to increase the distribution of NPS schemes. Further, to boost competition and choice of investment, PFRDA has permitted banks to launch their own NPS funds.

Last but not least, PFRDA has shared earlier with Outlook Money that it plans to include succession planning also under the NPS umbrella. On Friday, as per media reports, the regulator clarified that NPS assets are income, not capital assets, and thus, the transfer of these assets to the successor upon a subscriber’s death would not attract capital gain taxes.

As of now, there are over 90 million subscribers in NPS and APY together, with around Rs 16 lakh crore.