So, what does 100% equity in NPS mean, how does it work, and should investors consider it?
Under the Multiple Scheme Framework, pension fund managers can launch high-risk schemes that invest up to 100% in equities. The earlier NPS structure, now referred to as common schemes, is still available, with equity exposure capped at 75%.
The 100% equity option is a scheme that a pension fund manager can offer, rather than a rule requiring every NPS investor to put all their money into equities.
Common Schemes allow investors to select one scheme per Pension Fund Manager (PFM), while MSF allows investors to hold multiple schemes simultaneously.
For example, an investor could direct a larger share of new contributions to a 100% equity scheme and allocate the rest to a government securities scheme or a corporate bond scheme.
The biggest advantage is greater flexibility. Investors can choose schemes based on their risk appetite, financial goals, and stage of life.
MSF also allows pension fund managers to offer specialised strategies for different investor groups. Each MSF scheme will have its own NAV, benchmark, and risk profile, making it easier to track individual scheme performance.
The framework also retains NPS's regulated structure and existing tax benefits for eligible Tier-I contributions.
A 100% equity allocation should not be selected simply because it offers higher growth potential. Equity markets can be volatile, and investors should consider their age, income stability, dependents, liabilities, and existing equity investments.
A person in their 20s or 30s with decades until retirement may be better positioned to tolerate volatility. Someone approaching retirement may prefer a moderate or G-scheme allocation to reduce risk.
Cost is another factor. MSF schemes can charge fund management fees of up to 0.30% of AUM, compared with around 0.09% for some common schemes. Even a small cost difference can matter over a long period.
Investors could direct a larger share of contributions towards equity early in their careers and gradually increase relatively stable allocations as retirement approaches. Regular contributions can also help spread the impact of market volatility.
However, investors should not assume that the NPS will automatically reduce equity exposure as they approach retirement. Under MSF, the investor needs to choose how future contributions are allocated across schemes.
Disclaimer: This is purely for educational/informational purposes and should not be taken as any sort of investment advice. Always consult a SEBI-registered advisor before making any investment decisions.
Sheetal Goel is a Content Producer at Livemint, where she covers corporate developments, personal finance, business trends, markets, and SEBI-related updates. She focuses on simplifying complex financial concepts and presenting them in a clear, reader-friendly manner, thereby helping audiences better understand investment trends, personal finance, and market developments. Her writing focuses on making finance more accessible to everyday readers while maintaining clarity, accuracy, and relevance. <br><br> She holds a degree in Economics (Hons.) along with an MBA in Finance, which has helped her develop a strong foundation in financial analysis, market understanding, and business reporting. Before joining journalism, she worked with finance and broking firms, where she closely followed market developments, investment strategies, and evolving industry trends. This practical exposure strengthened her understanding of financial markets. She has also written content across multiple formats and platforms, including YouTube, LinkedIn, and Instagram. <br><br> Over time, she has developed expertise in covering market-linked stories, investor-focused topics, and regulatory updates in a simplified yet informative style. She also enjoys reading and listening to Hindi poetry, reflecting her appreciation for literature and creative expression beyond the world of markets and numbers.
