PFRDA Announces Major Update for NPS Subscribers: Scheme A to Be Merged with Schemes C and E

In a significant move aimed at strengthening the long-term retirement security of National Pension System (NPS) subscribers, the Pension Fund Regulatory and Development Authority (PFRDA) has announced a proposal to merge Scheme A (Alternative Assets) under Tier I into Schemes C (Corporate Bonds) and E (Equity). This decision follows a comprehensive performance review and is positioned as a step toward creating a more stable, diversified, and future-ready investment structure for pension wealth.

According to PFRDA, the merger seeks to simplify asset classifications, increase liquidity, and align the NPS framework with evolving market best practices. Subscribers who had earlier opted for Scheme A under the Active Choice category in Tier I are directly affected by this change.

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Why Scheme A Is Being Merged

Scheme A has historically been a niche option with a smaller corpus and fewer investment avenues. PFRDA notes that such limited scale restricts flexibility in managing risk and optimizing returns. With the proposed merger into Schemes C and E, subscribers’ contributions will move into larger and more diversified portfolios, offering a more balanced and stable investment experience.

The objectives behind this move include:

• Diversification & Stability: Scheme A’s small corpus created concentration risks. Integrating into larger schemes enhances stability and reduces exposure to narrow asset classes.
• Improved Risk-Adjusted Returns: Bigger schemes offer better portfolio management efficiencies, supporting more consistent long-term returns.
• Higher Liquidity: Certain assets under Scheme A had long lock-in periods. Schemes C and E ensure easier withdrawals and smoother switching options.
• Alignment with Market Reforms: SEBI’s evolving regulatory framework and broader financial market reforms necessitate simplified asset structures for pension funds.

PFRDA explains that the merger supports the broader national agenda of Formalization, Financialization, and Pensionalization (FFP), which aims to build stronger old-age income security for citizens.

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Part of a Larger Reform in NPS Architecture

The authority has recently approved extensive reforms to modernize the NPS investment framework, widen the investment universe, and enhance diversification. These changes are crafted to help subscribers accumulate more resilient pension wealth that is better aligned with India’s fast-growing economy.

By integrating Scheme A into Schemes C and E, PFRDA aims to ensure:

• More efficient fund management
• Reduced concentration risk
• A structure that is aligned with global pension fund models

For long-term savers, this translates to a stronger foundation for retirement planning.

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Subscribers Can Switch Without Any Cost Until 25 December 2025

To help subscribers transition smoothly, PFRDA has offered a one-time, cost-free window. All NPS subscribers who had opted for Scheme A (Tier I – Active Choice) can shift their accumulated wealth to any other asset class of their choice, following the applicable guidelines. The last date to exercise this option is 25 December 2025.

This ensures that subscribers retain complete control over their allocation preferences even as Scheme A is phased out.

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What Subscribers Should Do Now

While the merger is intended to benefit subscribers in the long run, individuals may consider reviewing:

• Their risk appetite
• Long-term return expectations
• Current asset allocation within NPS
• Preference between equity-heavy (E), debt-oriented (C), or balanced combinations

Subscribers choosing to shift out of Scheme A should use the switching option before the deadline to avoid automatic reassignment during the merger.

View PFRDA Letter: