PFRDA Raises NPS Equity Allocation Limit to 75% for All Subscribers Under Active Choice

The Pension Fund Regulatory and Development Authority (PFRDA) has announced a significant liberalisation of the National Pension System's investment guidelines. Effective 1 April 2026, all NPS subscribers under the Active Choice option can now allocate up to 75% of their contributions to equity (Tier E) at any age up to 60, removing the previous age-graded tapering that reduced equity allocation progressively after age 50.

What Changed

Under the previous Active Choice rules, equity allocation was capped at 75% up to age 50, then progressively reduced by 2.5% per year, reaching 50% at age 60. The new framework eliminates this forced de-risking, allowing subscribers to maintain a 75% equity allocation throughout their working life if they choose.

The rationale, according to PFRDA, is that India's increasing life expectancy (now averaging 72 years) means retirement savings need to generate returns for 15-20 years post-retirement, not just until retirement. Forcing subscribers into lower-return asset classes at age 50 was undermining long-term corpus adequacy.

Impact on Retirement Corpus

The impact is substantial for subscribers in their 50s. A 50-year-old NPS subscriber contributing 50,000 per month with the previous age-graded cap would accumulate approximately 1.8 crore by age 60, assuming 10% equity returns and 7% bond returns. Under the new flat 75% equity allocation, the same subscriber could potentially accumulate 2.05 crore, a difference of nearly 25 lakh, solely from maintaining higher equity exposure in the final decade.

However, PFRDA has added a mandatory risk acknowledgement form for subscribers above 55 who wish to maintain equity allocation above 60%. This ensures informed consent about the short-term volatility risk.

What Subscribers Should Do

If you are an NPS subscriber under Active Choice and are above 50, log into your NPS account on the CRA portal and review your current asset allocation. If your equity allocation has been automatically reduced by the previous age-graded formula, you can now increase it back to 75%. This change does not apply to Auto Choice (lifecycle funds), which continue to follow their predefined glide paths.

For new NPS subscribers, the Active Choice with high equity allocation remains the recommended approach for those with more than 10 years to retirement and a reasonable understanding of market volatility.