New NPS Rule: Mandatory Government Approval for Sector Shifts and Exits
In a recent update to the National Pension System (NPS) rules, the Pension Fund Regulatory and Development Authority (PFRDA) has made it mandatory for the original government office (source Nodal Office) to approve all requests for sector changes and exits by government employees. This new directive was issued in a circular on October 10, 2025.
The main change is that now every government sector subscriber who wishes to shift to a different sector (Inter-Sector Shifting or ISS) or exit the NPS must have their request authorized by their government employer's nodal office. This is required for any situation where the relationship between the employee and the government employer ends.
This new rule modifies a previous circular from December 22, 2022, which did not require this authorization for employees after they had retired or reached superannuation. The PFRDA has now removed this exemption to ensure better control and oversight on these requests.
The mandate applies to all government sector employees, including those in Central and State Governments, as well as government-owned entities like Public Sector Undertakings (PSUs) and Public Sector Banks (PSBs) that are registered as corporates. For employees of PSUs and PSBs, the Points of Presence (PoPs) servicing them must get consent from the employer before processing any exit or sector-shifting request.
This circular is effective immediately.
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