PFRDA circular aligns NPS Tier-II AMC with Tier-I, exempts balances under ₹1,000, sets 10% fee for dormant accounts. Dormancy flagging effective 1 July 2026.
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On 29 April 2026, the Pension Fund Regulatory and Development Authority (PFRDA) issued a circular to all Central Recordkeeping Agencies (CRAs) clarifying the charge structure under the National Pension System (NPS). The circular resolves ambiguity left by a September 2025 price-discovery directive, specifically around annual maintenance charges (AMC) for Tier-II accounts, dormancy fees, and PRAN opening costs. For roughly 65 million NPS subscribers, the changes are incremental but material for low-balance accounts, multiple-account holders, and those pausing contributions.
The PFRDA stated that the AMC for an NPS Tier-II account must align with the AMC applicable to a Tier-I account under the same sector (government or private). The sole exception: no AMC is levied on a Tier-II account with a corpus up to ₹1,000. The corpus at the end of each quarter determines whether the exemption applies.
The earlier 15 September 2025 circular set the following upper caps. No CRA may charge more:
For APY and NPS-Lite accounts with a nil balance, the AMC is nil. The PFRDA further clarified that each pension scheme maintained within a PRAN (Permanent Retirement Account Number) is treated as a separate account. This applies to both Tier I and Tier II. Each such account attracts AMC separately, as applicable.
If an account becomes dormant, the CRA levies 10% of the applicable AMC on that Tier I or Tier II account. The PFRDA defines a dormant account as one where no contribution is received for four consecutive quarters. The CRA flags such an account as dormant during the first week of the subsequent quarter in its system.
The reduced AMC of 10% applies for that subsequent quarter and continues until the account remains dormant. When a member makes a contribution during a quarter, the account is flagged as active in the first week of the following quarter.
CRAs must implement the flagging mechanism effective 1 July 2026. The corpus available at quarter-end determines the applicable AMC. Subscribers who pause contributions for a year (four quarters) will see a fee reduction from the full AMC to 10%, rather than a full charge. This is a benefit for irregular contributors.
The PFRDA clarified that the PRAN Opening Charge applies only at the time of initial PRAN generation. For activation or opening of each additional account (Tier I or Tier II) within an existing PRAN, the charge is nil.
Earlier, the September 2025 circular specified these opening charges:
The CRA collects applicable charges at the end of each quarter. For accounts where the employer bears CRA charges, the CRA raises an invoice on that entity. For other accounts, the CRA deducts units equivalent to the chargeable amount from the subscriber’s account. CRAs must also display the charge structure on their official website and mobile application.
The 15 September 2025 circular introduced price discovery for CRA charges but left questions unanswered. CRAs queried how to handle Tier-II AMC, dormancy pricing, and multi-account treatment. The 29 April 2026 circular addresses each point directly. It brings Tier-II AMC in line with Tier-I, exempts small balances, and standardizes dormancy fees at 10% of the cap.
The primary execution risk is whether CRAs update their systems and fee schedules by the deadline. Subscribers should check that their CRA displays the updated charge structure and does not exceed the caps. Any deviation – charging more than ₹100 (government) or ₹200 (private) for AMC, or applying full AMC on dormant accounts – would violate the circular.
For subscribers with a single Tier-I account, the impact is nil. For those holding both Tier I and Tier II, the change is moderate: Tier-II now incurs a separate AMC, matching Tier-I. The ₹1,000 corpus exemption protects small-balance holders from any charge. The dormancy rule reduces the inactivity penalty from full AMC to 10%, a relief for subscribers who pause contributions temporarily.
Subscribers with NPS-Lite or APY accounts benefit from the nil-balance exemption. CRAs will begin systematic dormant flagging from July 2026; contributors should monitor their account status and contribution frequency to avoid unexpected dormancy designation.
The PFRDA has tightened the fee framework to ensure uniformity across sectors and account types. For the vast majority of NPS holders, the change is marginal. The next concrete marker is 1 July 2026, when CRAs must demonstrate compliance with the dormant flagging rules and updated fee schedules.
Gopal Gidwani is a freelance personal finance content writer with 15+ years of experience. He can be reached on LinkedIn.
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