NPS vs NPS Sanchay: Key differences between the two retirement schemes explained

The National Pension System (NPS) has long been one of India's most popular retirement-focused investment schemes, offering market-linked returns along with tax benefits to subscribers. In early May this year, the Pension Fund Regulatory and Development Authority (PFRDA) has also introduced NPS Sanchay, a pension scheme designed for workers in the informal sector.

The new scheme has been introduced at a time when nearly 90% of the country’s workforce are employed in the country's informal sector but continue to remain outside formal retirement coverage, PFRDA said earlier. This is due to irregular income patterns, limited financial awareness, and lower access to organised pension products. Such workers include gig workers, daily-wage workers and self-employed individuals.

How Is NPS Sanchay different from regular NPS?

Though both schemes are designed to help individuals build a long-term retirement corpus, but their target-audience is different. Here is a closer look at NPS Sanchay and regular NPS, along with who it is meant for:

• Scheme type: Regular NPS operates under the All Citizen Model of the National Pension System framework, while NPS Sanchay has been introduced as a simplified variant under the All Citizen Model and MSF framework.
• Target audience: NPS is a broad retirement focused pension system for all eligible subscribers. NPS Sanchay aims to simplify investing by reducing complexities around fund selection and asset allocation, especially for investors with limited advisory support.
• Eligibility: Under the regular NPS all Citizen Model, eligible Indian citizens can open an account as per NPS rules. NPS Sanchay is open to Indian citizens aged 18-85 years through PoPs, PoP Service Providers, or the online platform of PFRDA.
• Investment structure: NPS follows standard investment guidelines applicable under the All Citizen Model. NPS Sanchay follows an investment structure aligned with government-linked schemes such as UPS, APY, NPS Lite, and Corporate CG.
• Investment choice flexibility: In regular NPS, subscribers can choose pension funds and asset allocation under prescribed regulations. NPS Sanchay also allows changes in pension funds and asset allocation, but within a simplified structure.
• Pension fund availability: NPS is offered through pension funds registered under the NPS framework. NPS Sanchay is also available across all pension funds registered with the authority.
• Investment alignment: NPS follows a subscriber-driven approach with flexible allocation choices, whereas NPS Sanchay is more closely aligned with government-sector investment guidelines and default allocation structures.

Withdrawal and exit rules of NPS Sanchay

PFRDA said that the existing exit and partial withdrawal rules applicable under NPS regulations will also apply to NPS Sanchay subscribers. As a result, withdrawals and exit requests under the scheme will continue to be governed by the standard NPS regulatory framework already in force.

Charges and contribution structure of NPS Sanchay

The insurance regulator also clarified earlier that the charge structure for NPS Sanchay will remain similar to existing common NPS schemes such as:

• NPS (All Citizen)
• NPS Vatsalya
• NPS Lite

With NPS Sanchay, PFRDA aims to simplify the retirement savings for workers of the informal sector. All the provisions, including the pension enrolment and investment process simpler for first-time investors and individuals outside the formal salaried workforce.