PFRDA Revises Corporate NPS Rules: Employers, Employees To Jointly Choose Pension Funds

The Pension Fund Regulatory and Development Authority (PFRDA) has issued a new circular revising key rules for the Corporate Model National Pension System (NPS). The update aims to give both employers and employees more freedom and clarity in choosing pension funds and investment schemes.

The revised circular, issued on November 12, 2025, updates an earlier directive from September and responds to feedback from corporates on decision-making in joint or employer-only NPS contribution models.

Key changes under the new NPS circular

1. Joint decision-making on investments

When both the employer and employee contribute to NPS (or when the employer contributes more), investment choices must be mutually agreed upon. This ensures both parties have a say in how retirement savings are invested.

2. Annual performance review of pension funds

Employers are now required to review the performance of chosen pension funds every year. Any fund changes should follow the mutual agreement, keeping in mind the long-term nature of retirement investments, typically over 20–30 years.

3. Voluntary employee contributions allowed

Employees can make additional voluntary contributions to other NPS schemes, even if their employer already contributes under a shared structure.

4. Choice of risk levels

Employees must be given options to select investment plans based on their individual risk appetite, ensuring flexibility within the pension fund.

5. Clear grievance redressal process

If employees have complaints about fund selection or investment decisions, they should first contact their HR department. Escalation to higher authorities will be allowed only if HR fails to respond, and proof of inaction must be provided.

6. Employers may grant full control to employees

Employers can also choose to let employees independently select their pension fund or scheme, without being bound by any prior agreement.

7. Role of PoPs and CRAs defined

Corporates must route all NPS-related services through Points of Presence (PoPs) as per PFRDA’s 2018 regulations. PoPs will communicate fund decisions to Central Recordkeeping Agencies (CRAs), which can only act upon official instructions from employers.

Why the change matters

This move aims to make the Corporate NPS model more transparent, flexible, and employee-friendly. It encourages collaboration between companies and staff while ensuring accountability in fund management and long-term wealth creation.

Read More: Govt Clarifies Gratuity Rules Under NPS: Which Employees Are Eligible and Who Misses Out?

Conclusion

With these reforms, PFRDA has empowered both employers and employees to take a more active role in managing retirement savings. By allowing flexible fund selection, annual reviews, and clear grievance handling, the new rules are expected to make the Corporate NPS model more efficient, participative, and investor-centric.

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