Every few years, India tries to make retirement sound exciting. This time, it might almost succeed.

The pension regulator’s newly introducedMoneycontrolNPS gets a makeover: Multiple schemes, 100% equity option now live from October 1 Multiple Scheme Framework (MSF) rewrote decade-old rules in the National Pension Scheme (NPS), and gave fund managers more room to innovate. Soon, HDFC launched an Equity Advantage Fund, Axis unveiled an NPS Golden Years Fund, Tata brought out its Smart Retirement Fund, and DSP introduced the Long Term Equity Fund.

The common thread that binds them all: up to 100% exposure to equity.

Unlike earlier, where funds had to limit their equity focus to 75%, MSF allows diverting a subscriber’s full investment amount, in a new scheme, into the asset class. It’s a chance at reaping higher returns.

Besides reducing the vesting period from the age of 60 to a minimum of 15 years from the investment, the Pension Fund Regulatory and Development Authority (PFRDA) has also mooted the idea of halving the mandatory annuityAnnuityA lump sum paid to a pension fund manager in exchange for a fixed monthly income limit to 20% of one’s retirement corpus.

All of this may sound like technical tweaks, but they mark a fundamental shift.

The NPS has long struggled to win savers’ confidence. Commissions were too low to attract distributors, investment rules too restrictive to appeal to younger investors, and annuities too inflexible to suit changing lifestyles. The fact that one had to set aside 40% of one’s retirement corpus into annuity was another deterrentThe Economic TimesInvestors know about NPS but do not invest.

The reforms—part of the changes by the PFRDA shifting to a higher gear in the last four months under its new chair, Sivasubramanian Ramann—were long overdue, said many industry stakeholders. “There are ambitious targets to increase the assets under management (AUM) for NPS by 10X in the next five years,” said a senior executive from a pension fund. 

That’s a lofty target for an instrument not as popular as, say, mutual funds.