The Pension Fund Regulatory and Development Authority (PFRDA) has announced a significant update to the National Pension System (NPS) charge structure, set to take effect from July 1, 2026. These revisions introduce a more standardized and transparent fee framework for pension subscribers, primarily focusing on annual maintenance charges (AMC), fees for dormant accounts, and costs associated with Permanent Retirement Account Numbers (PRANs).
Revised Annual Maintenance Charges (AMC)
A key change involves the alignment of Annual Maintenance Charges for Tier II accounts with those of Tier I accounts within the same sector, whether government or private. This move aims to standardize fees across different account types.
- Relief for Small Investors: The PFRDA has introduced a measure to protect small investors by waiving AMC for Tier II accounts holding a balance of up to ₹1,000 at the end of a quarter. This ensures that low-value accounts are not disproportionately burdened by maintenance costs.
- Separate Scheme Charges: Under the new framework, each pension scheme linked to a single PRAN will be treated as a distinct account for charging purposes. This means that if a subscriber holds multiple schemes under one PRAN, AMC will be levied individually on each scheme. While this enhances transparency in fee allocation, it could lead to higher cumulative charges for investors with diversified holdings across various schemes.
Managing Dormant Accounts
To address the issue of inactive accounts, the regulator has established a concessional framework. An account will be classified as dormant if no contributions are made for four consecutive quarters. For such accounts, only 10% of the applicable AMC will be charged, significantly reducing the financial burden on inactive subscribers. Once a fresh contribution is made, the account will be reactivated in the subsequent quarter, and standard charges will resume.
PRAN-Related Fees Clarified
The updated circular also provides clarity on PRAN-related charges:
- The PRAN opening fee will be a one-time charge, levied only at the initial account creation.
- Crucially, no additional charges will apply for opening or activating extra Tier I or Tier II accounts under an existing PRAN, simplifying the process for subscribers managing multiple accounts.
- Furthermore, accounts under the Atal Pension Yojana (APY) and NPS-Lite schemes with zero balance will not incur any AMC, offering relief to low-income segments and ensuring that inactive or small accounts do not accumulate charges over time.
Collection Mechanism and Broader Impact
All applicable charges will be collected at the close of each quarter, either through employer billing where relevant, or by direct deduction from subscriber accounts. The PFRDA has affirmed that all other provisions from its earlier circular dated September 15, 2025, will remain unchanged, ensuring continuity in the broader regulatory framework.
These revisions are designed to enhance transparency, predictability, and fairness in how NPS-related fees are applied. While small investors and dormant account holders stand to benefit from reduced charges, individuals maintaining multiple schemes under a single PRAN may need to reassess their portfolio structure to manage potential cost implications effectively. Overall, the changes represent a move towards a more streamlined and investor-friendly pension system, with clearer rules governing the application of charges.