Finance Minister Nirmala Sitharaman has lauded the National Pension System (NPS) for its strong performance and cost-effectiveness as a retirement planning tool, highlighting its potential to become a universal solution for financial security in India. Speaking at the NPS Diwas conference in New Delhi, organized by the Pension Fund Regulatory and Development Authority (PFRDA), Sitharaman noted that NPS equity schemes have delivered average annual returns exceeding 13% since their inception. Furthermore, debt and government securities schemes have also performed well, generating around 9% annually.
The NPS, launched in 2004 by the NDA government, initially targeted government employees, replacing the older defined-benefit pension model with a defined-contribution system. It has since been extended to all citizens, including those in the private sector and the self-employed. Sitharaman emphasized that the NPS has transformed retirement planning from a government-sector privilege into a universal tool for financial security.
Several factors contribute to the NPS's attractiveness. It is one of the lowest-cost pension management systems globally, which means more of a subscriber's money stays invested and grows over time. The NPS also offers portability, allowing subscribers to maintain the same account even when they change jobs, move cities, or transition to self-employment. The system is regulated and transparent, ensuring ease of account management. In 2024, the NPS was upgraded with a Direct Remittance (D-Remit) facility, enabling subscribers to receive same-day Net Asset Value (NAV) for their contributions, eliminating potential market gain losses due to processing delays.
Sitharaman has advocated for broader NPS coverage, particularly for informal and gig workers, as well as enhanced pension security for women and early financial literacy initiatives. She also proposed training women as "Pension Sakhis" to raise awareness and encourage NPS enrollment.
The Finance Minister highlighted the significance of retirement planning for self-reliance, aligning with the vision of "Aatmanirbhar Bharat". She noted that a robust pension system leads to deeper domestic savings and capital availability for long-term use, while also reducing the number of families facing distress due to illness or income loss in old age. According to the United Nations Population Fund (UNPFA), India's population aged 60 and above is projected to reach 20.8% of the total population by 2050, compared to 10.5% in 2022, underscoring the importance of retirement planning.
Effective October 1, 2025, non-government NPS subscribers can allocate up to 100% of their funds to equities under the multiple scheme framework (MSF). Each scheme will have moderate and high-risk variants, with equity exposure permitted up to 100% compared to the current 75% in high-risk options. Investors can choose new schemes under MSF without investing in the older "common schemes".
While past performance is not indicative of future results, the NPS has demonstrated its potential to deliver attractive returns. As of January 2025, LIC PF Fund generated the best returns of 9.01% in the past five years under the Central Government scheme, followed by UTIPF at 8.87% and SBI Pension Fund at 8.62%. For State Government schemes, LIC PF Fund also led with 8.94%, followed by UTIPF at 8.85% and SBI Pension Fund at 8.59%.
The NPS stands as a viable option for those seeking to secure their financial future through a well-regulated, transparent, and cost-effective pension system.
