PFRDA Merges NPS Tier I Scheme A into Schemes C and E: What Subscribers Need to Know

The PFRDA has announced an important change for National Pension System (NPS) Tier I subscribers. Scheme A, which invested in Alternative Investment Funds (AIFs), will now be merged into Scheme C (Corporate Bonds) and Scheme E (Equity). This update aims to improve liquidity, diversification, and overall efficiency for long-term retirement savings.

What Are the NPS Tier I Schemes?

Under NPS Tier I, subscribers can invest their money across different asset classes based on their risk appetite. These include:

• Scheme E: Equity investments
• Scheme C: Corporate bonds
• Scheme G: Government securities
• Scheme A: Alternative Investment Funds (AIFs), such as start-ups, infrastructure, SME funds, and venture capital

Scheme A allowed exposure to AIFs, but this exposure was capped at five per cent of the total investment.

Why Has Scheme A Been Merged?

PFRDA has taken this step mainly for two reasons. First, Scheme A had a relatively small corpus and limited investment options. By merging it with the much larger Schemes C and E, subscriber funds will now be part of broader and more diversified portfolios. This helps reduce concentration risk and improves stability.

Second, some investments under Scheme A had long lock-in periods, which reduced liquidity. After the merger, investments will move to schemes with higher liquidity, making withdrawals and fund switches smoother and easier for subscribers.

What Does This Mean for Existing Subscribers?

Subscribers who had chosen Scheme A under NPS Tier I (Active Choice) have been given a special window. They can switch their accumulated funds from Scheme A to any other asset class without paying any additional charges. This option is available until 25 December 2025.

After the merger, subscribers will benefit from more flexible portfolio management, better diversification, and a balanced approach between risk and returns.

Broader Changes in NPS

This merger is part of PFRDA’s wider efforts to modernise NPS and align it with evolving market practices. Recent steps such as the Multiple Scheme Framework and changes in scheme naming also aim to make the system simpler and more efficient. The move also aligns with broader regulatory changes in asset classification.

Read more: Savings vs BSBD Accounts: Which One Should You Use After RBI’s New Rules?

Conclusion

The merger of Scheme A into Schemes C and E is designed to make NPS Tier I investments more liquid, diversified, and stable. For subscribers, this means easier fund management and potentially smoother long-term wealth creation for retirement.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.

Investments in the securities market are subject to market risks. Read all the related documents carefully before investing.