Planning for a financially secure future has become more important than ever. With rising costs of living, uncertainty in jobs, and increasing life expectancy, the one question that haunts almost every working professional and business owner is: “How will I manage when there is no income?”
The National Pension System (NPS), regulated by the Pension Fund Regulatory and Development Authority (PFRDA), offers a structured yet flexible way to build retirement wealth and create a lifelong income stream. What makes NPS truly attractive is its triple tax benefit, low cost, and now, with the new Multiple Scheme Framework (MSF), greater flexibility to meet life goals even before retirement.
NPS for Retirement
The biggest challenge after 60 is not having a regular salary or business income. This is where NPS comes to the rescue.
• During your working years, you contribute small amounts regularly to your NPS account.
• At retirement (or exit), you can withdraw up to 60% of the accumulated corpus completely tax-free.
• The remaining 40% is converted into an annuity, which ensures you receive a fixed monthly pension for life.
This unique combination means your retirement years are secured with a mix of a tax-free lump sum (for large expenses like healthcare, children’s weddings, or buying a property) and a steady pension to cover monthly living costs.
New Multiple Scheme Framework
From 1 October 2025, PFRDA is introducing a game-changing feature – the Multiple Scheme Framework (MSF) for NPS subscribers in the non-government sector.
Here’s what makes it different from the regular NPS:
• Multiple Schemes in One Account: Instead of investing in just one scheme per tier, you can now invest in multiple schemes under the same NPS account (PRAN).
• Personalised Portfolios: Choose different risk levels – conservative, moderate, or aggressive – as per your goals.
• Life-Stage Benefits: Young investors can opt for higher equity exposure (up to 100%) for wealth creation, while older subscribers can shift to safer, bond-heavy schemes.
• Maturity in 15 Years: Unlike the traditional age-linked lock-in (till 60), some new schemes allow partial exits after 15 years. This opens doors for life goals beyond retirement.
• Lower Cost than Mutual Funds: With charges capped at just 0.30% annually, NPS is among the most cost-effective investment avenues.
• Tax Benefits Intact: Section 80C (up to Rs 1.5 lakh), plus an additional Rs 50,000 under 80CCD(1B), and employer contribution benefits under 80CCD(2).
NPS for Life Goals
Traditionally, NPS was seen only as a retirement product. But with MSF, it can also become your goal-based investment tool. Here’s how:
• Parents of Young Children: Start small, and in 15 years use the maturity to fund higher education or create a backup for your child’s dreams.
• Young Professionals: If you begin at 25, by 40–45 you can use the partial exit feature to fund a new business venture, world travel, a down payment for a house, or even buying a car.
• Business Owners: NPS offers disciplined savings with high equity exposure for growth and a safety net of pension in later years.
• Women Investors: Build financial independence for retirement while keeping the option open for medium-term goals like property purchase or children’s milestones.
Just think – a small monthly contribution of Rs 5,000 over 20 years at an expected 10% return can create a retirement corpus of over Rs 75 lakh, while also keeping your tax outgo low every year.
Why Choose NPS?
While mutual funds are excellent for wealth creation, they lack the tax-free retirement withdrawal and guaranteed pension conversion that NPS offers. NPS combines the growth potential of equity, the stability of bonds, and the security of annuity income – all at a fraction of mutual fund costs.
In short, NPS is not just another investment product; it is a complete retirement and goal-based financial planning solution.
The Bigger Picture
While NPS is a cornerstone for retirement, financial planning is incomplete without:
• Term Insurance: Income replacement for your family in case of an untimely demise.
• Health and Accidental Insurance: Protection from medical and life risks.
• Mutual Funds, Stocks, Real Estate, and Gold: For wealth diversification and liquidity.
A missing link in any of these can create financial stress for your family. NPS complements these by ensuring lifelong income and tax efficiency.
Final Word
The new Multiple Scheme Framework makes NPS more flexible, more powerful, and more relevant for today’s generation. Whether you are a parent planning for your child’s future, a young professional dreaming of financial independence, or a business owner seeking stability after retirement – NPS can play a crucial role.
So start today – because the earlier you begin, the stronger your financial foundation will be. Remember, your retirement income and life goals don’t depend on chance; they depend on planning. And NPS is one of the smartest tools to make that planning successful.
(The writer is the founder of ‘Investment Options’, an insurance and investment consultancy based in Goa since 2013, with pan-India clientele)
