Explained: 3 NPS schemes for flexible, assured and predictable pension proposed by PFRDA

The National Pension System (NPS) is transforming with the Pension Fund Regulatory and Development Authority (PFRDA) proposal of 3 distinct new schemes designed to offer subscribers greater flexibility and assurance in their retirement payouts.

This move fundamentally shifts the NPS toward a framework that meticulously caters to diverse subscriber needs, balancing market-linked returns with the demand for a guaranteed, predictable income stream after retirement.

Explained: 3 pension schemes proposed by PFRDA

This is a proposed retirement plan structure that aims to give a flexible income while trying to maximise total savings during retirement years.

This scheme splits retirement savings into two parts:

⦁ Step-up Systematic Withdrawal Plan (SWP): A large portion of savings stays invested in a market-linked fund. You draw a rising monthly income from it.

⦁ Annuity: A smaller portion is used to buy a guaranteed, fixed income stream, ensuring you always have a basic, predictable amount of money no matter what the market does.

This scheme is designed for people who prioritise certainty in their retirement income. This is the most conservative and secure option of the proposed schemes.

It functions like a traditional guaranteed pension, but with a crucial upgrade, it protects you from the rising cost of living.

You get a guaranteed amount you were aiming for. That amount automatically increases every year. The increase is linked to the official inflation rate for workers (CPI-IW).

This scheme transforms the abstract concept of savings into a concrete, guaranteed retirement income. It operates on the innovative concept of "Pension Credits". As you save, you accumulate credits, and critically, each credit directly assures a fixed monthly pension payout in your retirement.

This focus on innovation was underscored by the recent celebration of NPS Diwas 2025 on October 1, 2025, in New Delhi Delivering the keynote address, Union Finance Minister Nirmala Sitharaman, strongly endorsed the necessity of retirement planning, stating:

"As India marches towards the vision of Viksit Bharat 2047, financial independence and dignity must remain at the core of our growth story. Pension planning is not a choice, but a necessity for every citizen to secure their old age."

With over 9 crore subscribers and ₹15.5 lakh crore AUM as of August 31, NPS has consistently delivered more than 9% CAGR over 14 years.