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What Are The Investment Options Under NPS?

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While subscribing to the CRA system under NPS, an NPS subscriber must select a Pension Fund Manager (PFM) as well as a scheme type. The subscribers have a number of alternatives from which to pick. Multiple PFMs, investment choices (Auto or Active), and four asset classes (Equity, Corporate Bond, Government Bond, and Alternative Infrastructure Funds) are available in NPS. A subscriber is first required to select a PFM and then choose from one of the following scheme options.

 

Pension Fund Managers Under NPS
 

Pension Fund Managers Under NPS

The subscriber must first select one PFM from the below list:

  • Birla Sun Life Pension Management Limited
  • HDFC Pension Management Company Limited
  • ICICI Prudential Pension Funds Management Company Limited
  • Kotak Mahindra Pension Fund Limited
  • LIC Pension Fund Limited
  • SBI Pension Funds Private Limited
  • UTI Retirement Solutions Limited

NPS Investment Options

The National Pension System (NPS) gives investors two options i.e. Auto Choice and Active Choice for investing in four asset classes: equities, government securities, corporate debt, and alternative investment funds (AIFs).

Active Choice Option In NPS

Based on your risk behaviour and personal preferences, you can allocate the funds according to your choice. The PFM, Asset Class, and per cent of allocation in each scheme of the PFM can be specified by the subscriber according to his or her choice. Under this option, there are four asset classes: equity, corporate debt, government bonds, and alternative investment funds, from which the allocation must be stated under a single PFM.

  • Asset class E - Equity and related instruments
  • Asset class C - Corporate debt and related instruments
  • Asset class G - Government Bonds and related instruments
  • Asset Class A - Alternative Investment Funds including instruments like CMBS, MBS, REITS, AIFs, Invlts etc.

NPS subscribers can choose multiple Asset Class under a single PFM using the active choice option, as shown below:

  • Up to the age of 50, you can invest up to 75 per cent of your overall asset allocation in equity.
  • For Alternative Investment Funds, the percentage contribution value should not exceed 5%.
  • The overall allocation throughout E, C, G, and A asset classes should be 100%.
Equity Allocation Matrix for Active Choice

Equity Allocation Matrix for Active Choice

The maximum allowed equity investment will be determined by the equity allocation matrix described below. The equity allocation will go down according to the subscriber's age.

Age (years)Max. Equity Allocation
Up to 50 75%
51 72.50%
52 70%
53 67.50%
54 65%
55 62.50%
56 60%
57 57.50%
58 55%
59 52.50%
60 & above 50%
Source: npscra.nsdl.co.in

Auto Choice Option Under NPS

Auto Choice Option Under NPS

NPS provides another option for members who have less exposure to equity investments. In case of less asset allocation knowledge, a subscriber can select the Auto Choice option. Under this option, investments will be made in a life-cycle fund. A predefined portfolio will decide the portion of contribution invested throughout three asset classes in this option. At the earliest age of registration (18 years), the auto choice will include investing 50% of pension money in E Class, 30% in C Class, and 20% in G Class. Under this choice, the CRA system will select the scheme as well as the allocation ratio depending on the age of the Subscriber at the time of registration. Individuals' presence in equity and corporate debt appears to decline as they become older. There are three alternative alternatives accessible inside ‘Auto Choice' based on the risk tolerance of the Subscriber - Aggressive, Moderate, and Conservative. The following funds are described in-depth:

LC75 - Aggressive Life Cycle Fund

LC75 - Aggressive Life Cycle Fund

This Life cycle fund allows for an equity investment cap of 75% of total assets. The equity investment exposure begins at 75% till the age of 35 and subsequently decreases according to the subscriber's age.

AgeAsset Class EAsset Class CAsset Class G
Up to 35 years 75 10 15
36 years 71 11 18
37 years 67 12 21
38 years 63 13 24
39 years 59 14 27
40 years 55 15 30
41 years 51 16 33
42 years 47 17 36
43 years 43 18 39
44 years 39 19 42
45 years 35 20 45
46 years 32 20 48
47 years 29 20 51
48 years 26 20 54
49 years 23 20 57
50 years 20 20 60
51 years 19 18 63
52 years 18 16 66
53 years 17 14 69
54 years 16 12 72
55 years & above 15 10 75

LC50 - Moderate Life Cycle Fund

LC50 - Moderate Life Cycle Fund

This Life cycle fund allows for an equity investment cap of 50% of total assets. The equity investment exposure begins at 50% till the subscriber is 35 years old and subsequently decreases as the subscriber's age increases.

AgeAsset Class EAsset Class CAsset Class G
Up to 35 years 50 30 20
36 years 48 29 23
37 years 46 28 26
38 years 44 27 29
39 years 42 26 32
40 years 40 25 35
41 years 38 24 38
42 years 36 23 41
43 years 34 22 44
44 years 32 21 47
45 years 30 20 50
46 years 28 19 53
47 years 26 18 56
48 years 24 17 59
49 years 22 16 62
50 years 20 15 65
51 years 18 14 68
52 years 16 13 71
53 years 14 12 74
54 years 12 11 77
55 years & above 10 10 80

LC25 - Conservative Life Cycle Fund

LC25 - Conservative Life Cycle Fund

This Life cycle fund allows for an equity investment maximum of 25% of total assets. The equity investment exposure begins at 25% till the age of 35 and subsequently decreases as the subscriber's age increases.

AgeAsset Class EAsset Class CAsset Class G
Up to 35 years 25 45 30
36 years 24 43 33
37 years 23 41 36
38 years 22 39 39
39 years 21 37 42
40 years 20 35 45
41 years 19 33 48
42 years 18 31 51
43 years 17 29 54
44 years 16 27 57
45 years 15 25 60
46 years 14 23 63
47 years 13 21 66
48 years 12 19 69
49 years 11 17 72
50 years 10 15 75
51 years 9 13 78
52 years 8 11 81
53 years 7 9 84
54 years 6 7 87
55 years & above 5 5 90

How to change Auto/Active Choice in NPS?

How to change Auto/Active Choice in NPS?

To change your Auto or Active Choice option under NPS, you can follow the steps listed below:

  • Visit www.cra-nsdl.com and sign in to your account using your User ID and IPIN.
  • Now click on ‘Transact Online' and select 'Change Scheme Preference'
  • Now select your ‘Tier Type' for which you want to make changes.
  • Now choose the ‘Scheme-preference type' and submit.
  • Now select ‘Scheme Preference Change' and select your scheme preference type as Active or Auto.
  • Now click on ‘Submit' and a confirmation screen will appear.
  • Now click on ‘Send OTP' and you will get an OTP on your registered mobile number.
  • Enter the received OTP and click on Submit OTP.
  • Once the OTP is verified, an Acknowledgement number will be displayed on your screen.

Read more about: nps national pension system
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