Summary of this article
PFRDA allows Pension Funds to design asset allocation patterns.
PFs are allowed 100 per cent allocation to equity in NPS Vatsalya, similar to MSF.
PFs are permitted to get subscribers' data from CRAs, to spread awareness around NPS Vatsalya.
The Pension Fund Regulatory and Development Authority (PFRDA) has permitted 100 per cent equity allocation in the NPS Vatsalya scheme, similar to the Multiple Scheme Framework (MSF) of the National Pension System (NPS). The Pension Fund can decide the pattern of asset allocation. They can either choose the pattern prescriber by the regulator, with no minimum asset allocation requirement across asset classes, or design their own asset allocation pattern for the Vatsalya scheme.
Earlier, in a circular issued in January 2026, the guidelines prescribed asset allocation for Pension Funds. It permitted 50-75 per cent in equity and related investments, 15-20 per cent in Government securities (G-secs) and related instruments, and 10-30 per cent in short-term money market instruments. However, where a Pension Fund is designing its own pattern, it is required to disclose it to the subscribers at the time of onboarding them, as well as publish it prominently on the website that is easily accessible.
Further, Pension Funds may directly inform NPS Vatsalya subscribers about their asset allocation for the scheme, their investment approach, scheme features, risks, etc., to enable them to make an informed decision.
How Would 100 Per Cent Equity Allocation Affect NPS Vatsalya Subscribers?
Saurabh Bansal, founder, Finatwork Investment Advisor, a Securities and Exchange Board of India - registered investment advisor (RIA) said that parents can now select the ‘Active Choice’ mode, a 100 per cent equity allocation when the child is young, maximising the power of time before transitioning to more conservative ‘Auto Choice’ cycles later in life.
“This flexibility allows Pension Funds to offer aggressive growth strategies that were previously restricted, making NPS a competitive alternative to portfolio management services (PMS) or high-conviction Mutual Funds (MFs),” he said.
Bansal added that NPS Vatsalya now matches the potential of equity mutual funds. The significantly lower expense ratio (often less than 0.10 per cent) in NPS would generate a significantly larger corpus over a 50-year horizon due to cost-arbitrage. There is no capital gain in NPS despite investing in equity, whereas in equity mutual funds, long-term capital gains (LTCG) are taxed at 12.50 per cent. He added that mutual funds should be used for high-cost milestones like university education, and NPS, strictly for wealth creation and retirement.
Subscriber Data Sharing With Pension Funds
In addition to this, the regulator, through the circular, allowed the sharing of subscribers’ data with Pension Funds. "To provide structured subscriber insights such as geographical distribution, gender diversity, contribution behaviour and personalised communication, it has been decided by the authority that the requisite subscriber information under NPS Vatsalya shall be shared by the concerned CRAs with the respective Pension Funds,” the circular dated February 23, 2026 read.
The central recordkeeping agencies (CRAs) have the data of subscribers, which, according to the circular, can be shared with the Pension Funds, subject to conditions, such as for the purpose of outreach, communication, or servicing, scheme management. The data sharing must be in compliance with the Digital Personal Data Protection Act, 2023, the IT Act, 2000, and other applicable laws.
The aim is to enable Pension Funds to reach out to subscribers, promote and distribute the scheme, facilitate innovation and engagement, support scaling and sustainability of the scheme, enhance enrolment, take timely corrective measures, and assess performance objectively. The Pension Funds and associated intermediaries need to update their systems per the norms, because any data breach or misuse of subscribers’ information will be dealt by regulatory action.
