National Pension System (NPS) is administered and regulated by Pension Fund Regulatory and Development Authority (PFRDA).
Under NPS, one can have their own choice of investment depending on their age, risk factors. In case subscriber does not want to exercise a choice, his/her money will be invested as per the "Auto Choice" option, where money will get invested in various type of schemes as per subscriber's age.
The NPS offers two approaches to invest subscriber's money;
Active choice - Individual Funds (Asset Class E, Asset Class C, and Asset Class G)
Subscriber will have the option to actively decide as to how his/her NPS pension wealth is to be invested in the following three options:
Asset Class E - Investments in predominantly equity market instruments.
Asset Class C- investments in fixed income instruments other than Government securities.
Asset Class G - investments in Government securities.
Subscriber can choose to invest his/her entire pension wealth in C or G asset classes and up to a maximum of 50% in equity (Asset class E). Subscriber can also distribute his/her pension wealth across E, C and G asset classes, subject to such conditions as may be prescribed by PFRDA.
Auto choice - Lifecycle Fund
NPS offers an easy option for those participants who do not have the required knowledge to manage their NPS investments. In case subscribers are unable/unwilling to exercise any choice as regards asset allocation, their funds will be invested in accordance with the Auto Choice option.
In this option, the investments will be made in a life-cycle fund. Here, the fraction of funds invested across three asset classes will be determined by a pre-defined portfolio.