MS Sahoo Committee for NPS Reforms

• 16 Jan 2026

Source: Mint 

Why in News? 

The Pension Fund Regulatory and Development Authority (PFRDA) has established a high-level committee to design a regulatory framework for assured payouts under the National Pension System (NPS), aiming to address post-retirement income certainty. 

• In a separate development, PFRDA has issued the NPS Vatsalya Scheme Guidelines 2025, providing comprehensive information on the NPS Vatsalya. 

What are the Key Facts Regarding the Newly Constituted Committee on NPS? 

• About: It is a 15-member panel headed by MS Sahoo, former chairperson of the Insolvency and Bankruptcy Board of India (IBBI). It is constituted as a standing advisory committee on structured pension payouts and can invite external specialists for consultation. 
• Objectives: The primary objective is to formulate guidelines for legally enforceable, market-based guarantees under the NPS.  
  • This involves defining key parameters like lock-in periods and pricing, establishing risk management norms with capital requirements, and examining tax implications for in-system payouts. 
• Significance: It marks a shift from exit flexibility to income certainty in retirement, addressing a key gap in India's pension system. This aims to boost confidence in long-term savings and strengthen financial security, aligning with the Viksit Bharat 2047 vision for financial independence in old age.

National Pension System (NPS)

• About: Introduced on 1st January 2004, NPS is a market-linked, contributory pension scheme designed to provide individuals with a retirement income, replacing the Old Pension System (OPS).  
• Working of NPS: Administered by the PFRDA under the PFRDA Act, 2013, NPS is funded jointly by the employee and the government. Employees contribute 10% of their basic pay and dearness allowance, matched by a 14% contribution from the government. 
  • Subscribers can select from various schemes, pension fund managers, and private companies to invest their contributions. Unlike OPS, NPS does not offer an assured pension. 
• Need for NPS: The previous OPS was unfunded, lacking a dedicated corpus, which caused government pension liabilities to balloon from Rs 3,272 crore (1990-91) to over Rs 1.9 lakh crore (2020-21), creating an unsustainable fiscal burden. 
• Transition to UPS: Faced with opposition due to lower guaranteed returns and employee contributions compared to OPS, the government formed the Somanathan Committee in 2023. Its recommendations have led to the new Unified Pension Scheme (UPS), shifting the focus toward greater income certainty in retirement

What is NPS Vatsalya? 

• About: NPS Vatsalya is a dedicated, long-term contributory savings scheme under the NPS designed exclusively for the financial security of minors. It aims to nurture a culture of savings and financial literacy from an early age. 
• Eligibility and Operational Features: Open to all Indian citizens, including NRI/OCI, below 18 years, with the minor as the sole beneficiary. 
  • The account is opened in the minor's name but operated by a parent/legal guardian. 
  • The minimum initial and annual contribution is Rs 250, with no upper limit; contributions can also be gifted. 
• Flexibility and Withdrawal Provisions: Allows partial withdrawals after 3 years for specific purposes like education and medical treatment, limited to 25% of the minor's own contributions. 
• Transition Upon Attaining Majority: Between 18 and 21 years, the subscriber can continue with NPS Vatsalya, shift to the standard NPS Tier I, or exit. 
  • Exit rules mandate using a minimum 20% of the corpus to purchase an annuity, with full withdrawal permitted if the total corpus is Rs 8 lakh or less. 

Frequently Asked Questions (FAQs) 

1. What is the purpose of the MS Sahoo committee? 
The committee is tasked with formulating guidelines for legally enforceable, market-based guaranteed payouts under NPS to enhance income certainty after retirement. 

2. How does NPS differ from the Old Pension Scheme (OPS)? 
Unlike OPS, NPS is market-linked, contributory, and does not offer an assured pension, with contributions from both the employee (10%) and government (14%). 

3. Who is eligible for NPS Vatsalya? 
All Indian citizens, including NRI/OCI, below 18 years, with the minor as the sole beneficiary, operated by a parent or legal guardian. 

UPSC Civil Services Examination, Previous Year Questions (PYQs)

Q. Who among the following can join the National Pension System (NPS)? (2017)

(a) Resident Indian citizens only 

(b) Persons of age from 21 to 55 only 

(c) All State Government employees joining the services after the date of notification by the respective State Governments 

(d) All Central Government employees including those of Armed Forces joining the services on or after 1st April, 2004 

Ans (c)

Q. Regarding ‘Atal Pension Yojana’, which of the following statements is/are correct? (2016)

1. It is a minimum guaranteed pension scheme mainly targeted at unorganised sector workers. 
2. Only one member of a family can join the scheme. 
3. Same amount of pension is guaranteed for the spouse for life after the subscriber's death. 

Select the correct answer using the code given below: 

(a) 1 only  

(b) 2 and 3 only 

(c) 1 and 3 only  

(d) 1, 2 and 3 

Ans: (c)