Budget 2026:
While EPF is mandatory, NPS remains optional, despite its low cost, transparency and market-linked returns. Today, only about 21,000 corporates offer employer NPS, compared to nearly 8 lakh establishments registered with EPFO.
Here are the top 5 ways the National Pension System can be made lucrative and help widen pension coverage as we talk about what can be done before Budget 2026. We need to find ways to get more people to join the National Pension System. This includes people who work for a salary people who work for themselves and people who do not have a job. The National Pension System needs to be more lucrative to help these people. We want to make sure the National Pension System is good, for everyone more people will join and have a better retirement.
🧠 1. Enhance Tax Incentives:
Making the National Pension System more attractive with ** tax benefits** can get more people to put money into it. This is especially true, for people who get a salary and those who work for themselves. The National Pension System already gives us tax breaks. For example we can deduct money under Sections 80C. We also get an extra ₹50,000 under Section 80CCD(1B). This already helps us save for when we retire. ([The Times of India][2])
🪙 2. Simplify & Improve Withdrawal Rules:
We need to make the rules about taking money out of the National Pension System and leaving it ** flexible and easier to understand**. This is especially true when people retire. If we do this people might be more willing to join the National Pension System. Some ideas include changing the rules about how money people have to use to buy an annuity when they retire. For example people might not have to use much of their money to buy an annuity. Another idea is to let people take out money all, at once when they retire. This would make the National Pension System an appealing way for people to save for retirement. ([The Economic Times][3])
📈 3. Tax-Free Annuity Income:
Making **annuity income** completely free, from taxes or giving tax benefits to **pension payouts** would really help people get more money after they retire. This is a thing because it makes saving for retirement more worthwhile. It also solves the problem of people worrying about paying taxes on their **pension payouts**. ([The Times of India][1])
🌐 4. Boost Awareness & Accessibility:
Expanding **digital access, financial literacy initiatives, and targeted outreach** — especially among informal and gig workers — could widen the pension net. Educating people about the benefits of disciplined long-term savings and the growing flexibility in NPS could raise adoption. ([The Times of India][1])
📊 5. Diversify & Modernise Investment Options:
Offering more **flexible investment choices** and aligning schemes closer to market returns can attract younger and risk-aware investors. Recent reforms already allow customized schemes and up to 100% equity exposure, giving potential for higher long-term growth compared with older conservative allocations.