Summary of this article
PFRDA issues revised guidelines for Corporate NPS subscribers
Employers and employees must mutually agree on pension fund choices
Grievances can be escalated to HR if issues arise
The Pension Fund Regulatory and Development Authority (PFRDA) issued a circular regarding the Corporate model of the National Pension Scheme (NPS). The latest circular, dated November 7, 2025. This recent circular partially modifies the earlier circular issued on September 12, 2025, regarding this matter. The revised guidelines address the concerns raised by various corporate employers about the selection of the pension funds and investment choices for their employees. To clarify the confusion surrounding who will decide the pension fund and fund allocation, the PFRDA has issued modified guidelines.
The circular clarifies that where both employer and employee contribute or the employer is the sole contributor, the pension fund choice and the asset allocation decision should be made through a mutual agreement between the employer and employees. The agreement can follow “a formal and mutual agreement between the management and the employees in whatever manner that is accepted between the two parties”, it reads.
Long-Term Investment View
It emphasises that the employer will review the decision of the pension fund taken initially, based on the mutually agreed terms. Employers will need to take into account the long-term nature of the pension savings and the historic performance of different asset classes over 2-3 decades. Accordingly, they need to decide and educate the employee about the reason for their specific choice.
The consultative process and mutual agreement in making the decision are aimed at fostering financial education among employees and ensuring investment decisions align with sustainable long-term wealth generation rather than short-term savings and impulsive investments.
Voluntary Investment Choices
The circular highlights that even if an employee co-contributes in NPS, such an employee, if willing to contribute in common schemes or other schemes under the multiple scheme framework (MSF), can do so voluntarily.
The mutual agreement should have a clause to allow sufficient scheme options within a pension fund to suit the varied risk profile of subscribers.
Grievance Redressal
For any grievance from investment decisions under the corporate model, employees can lodge their complaints with the corporate Human Resource (HR) department. In case of no or insufficient action taken by the HR, the employees, after attaching the complaint and providing the proof of inaction, may escalate the complaint.
Full Autonomy For Employees To Decide Investment Choices
According to the circular, employers can give employees full autonomy in selecting the investment scheme or pension funds at any time, without any prior agreement or reference in the mutual agreement.
Communication With The Points Of Presence (PoPs)
The employers are required to engage the points of presence (PoPs) in the NPS, to provide administrative services as mandated by Regulation 15 of the PFRDA (Points of Presence) Regulations, 2018. Any mutual agreements between the employer and employees should be communicated by PoPs to the central record-keeping agencies (CRAs) in writing as per protocols. However, for public sector employees, PoPs can make such communications only after the respective organisation issues an internal circular.
And finally, the CRAs are allowed to implement the changes in the system only after receiving instructions from employers. This is to ensure transparency in the system.
Note that the previous circular dated September 12, 2025, allowed either the employer or employee the power to select the pension fund and asset allocation, and did not make it mandatory to involve the employee in making the selection decision. Further, if the employer makes the selection decision, employees are permitted to change their choice only after one year.
Now, the modified rules make pension fund and investment selection processes transparent and flexible by involving employees, and authorising the employer to give employees autonomy to make decisions about their choice.
