Decoding the New NPS Nomenclature: Simpler Names, Smarter Choices

Introduction

The Pension Fund Regulatory and Development Authority (PFRDA) recently released a circular introducing a rationalization of nomenclature for the Auto Choice / Life Cycle Funds under the National Pension System (NPS).

In simpler words, PFRDA has renamed one NPS investment option to make it clearer, simpler, and better align the nomenclature with their actual risk–return profiles.

NPS nomenclature:

• Common Schemes (Active Choice or Auto Choice)

• Asset classes (EGCA) - (Equity, Government Bonds, Corporate Bonds, Alternatives)

Each NPS scheme follows a specific code or naming format that reflects all these details.

Why the Change Was Needed

Earlier, the Balanced Life Cycle Fund (BLC) had a higher equity exposure than the Aggressive LC-75 Fund between the ages of 45 and 55, confusing many investors. The terminology didn’t reflect the actual level of risk and return.

To fix this, PFRDA reviewed the Auto Choice schemes and rationalized the naming system.

Old vs New NPS Nomenclature

Old Name	New Name	Equity Exposure between age 45 to 55
LC 25 – Conservative Life Cycle Fund	Life Cycle 25 – Low (5E/55Y)	15% - 5%
LC 50 – Moderate Life Cycle Fund	Life Cycle 50 – Moderate (10E/55Y)	30% - 10%
LC 75 – Aggressive Life Cycle Fund	Life Cycle 75 – High (15E/55Y)	Decreases from 35% to 15%
Balanced Life Cycle Fund (BLC)	Life Cycle – Aggressive (35E/55Y)	Decreases from 50% to 35%

(E = Equity, C = Corporate Bonds, G = Govt Securities)

Life Cycle – Aggressive is structured for investors who prefer staying invested in growth assets for a longer period. Its tagline is “Be aggressive & stay invested longer in growth assets — for a stronger retirement corpus”. It captures its focus on maximizing long-term returns by maintaining a higher equity exposure well into the midlife stage.

Life Cycle 75 – High targets investors willing to embrace higher equity exposure for greater long-term rewards. The fund aims to accelerate wealth creation early in an investor’s career. Its positioning “Accelerate wealth creation early harnessing high equity for your retirement goals” underscores the importance of compounding and early investment in equities to achieve a strong retirement corpus.

Life Cycle 50 – Moderate fund’s tagline is “Balance growth and protection, a steady path for building and safeguarding retirement wealth,” which highlights its goal of providing stable, long-term wealth accumulation while managing risk sensibly throughout the retirement journey.

Life Cycle 25 – Low is designed for conservative investors who prioritize safety over growth, aiming to preserve savings with steady growth. Its market positioning is “Preserve your savings with steady growth designed for stability as you near retirement”, which reflects its focus on capital protection and consistent returns, making it ideal for those seeking financial security approaching retirement.

The Bigger Change: “Common Schemes”

PFRDA also introduced a new framework called the Multiple Scheme Framework (MSF). Here’s what it means in simple terms:

• Earlier, investors could choose between Active Choice (you pick your asset mix) or Auto Choice (the system decides the mix based on age).

• Now, both these options will be collectively referred to as Common Schemes (CS).

• You can now:

  o Invest in multiple schemes managed by one or more Pension Fund Managers (PFMs).

  o Choose multiple Common Schemes with 1 or more PFMs

  o Have multiple PRAN accounts across different CRAs (Central Recordkeeping Agencies).

This gives investors more flexibility to diversify across schemes and fund managers.

Example

Ravi, a 30-year-old NPS subscriber, wanted higher long-term growth with higher risk-taking

Before the Change

Ravi chose LC 75 (Aggressive Life Cycle Fund), assuming it was the highest equity option.

However, in reality, by age 45, he had only ~35% in equity, which tapered down to 15% by age 55.

Another investor in the Balanced Life Cycle Fund (BLC) actually had more equity exposure than Ravi between the ages of 45 to 55 (50% to 35%)

Result: Confusion — Ravi wasn’t sure if he’d really chosen the most aggressive plan.

After the Change

Now, Ravi can clearly see the options:

• Life Cycle 75 – High (15E/55Y) → standard aggressive option

• Life Cycle – Aggressive (35E/55Y) → even higher equity exposure

Result: Ravi can confidently pick the fund that truly matches his risk level, because the name tells him everything — the risk level and how the equity tapers till age 55.

Under the new Multiple Scheme Framework (MSF):

• Ravi can open multiple PRAN accounts across different CRAs.

• Within a single PRAN, he can split his NPS investment across multiple Pension Funds and Common Schemes.

Impact on Investors

Before	After (Post-Oct 2025)
Fixed naming (LC25/50/75) and sometimes confusing equity mix	Clearer names showing equity exposure and tapering age
Only one Auto/Active choice under one CRA	Multiple Common Schemes possible under one or more CRAs
Confusing risk levels (BLC vs LC75)	Risk–return alignment made transparent
Limited flexibility	More freedom and diversification options

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Conclusion

The recent rationalization of NPS nomenclature by PFRDA simplifies how investors understand and choose their pension funds. By renaming the Life Cycle Funds to clearly reflect their equity exposure and tapering pattern, the system now eliminates the confusion that existed under the earlier LC25, LC50, and LC75 formats.

Beyond renaming, the introduction of the Multiple Scheme Framework (MSF) and Common Schemes (CS) gives subscribers greater control and flexibility. Investors can now diversify across multiple Pension Fund Managers and scheme types under a single PRAN, leading to a more customizable retirement planning experience. Overall, this change makes NPS more user-friendly and investor-centric.