Close on the heels of the 7th Pay Commission recommendations being approved by the Union Cabinet, Government employees could soon have the option to invest up to 75 per cent of their contributions to the National Pension System (NPS) in equities. This would be a five-fold jump in the maximum equity exposure allowed for government NPS. Existing investment guidelines for government employees mandate investment in equity to a maximum of 15 per cent with the floor level set at 5 per cent. The rest has to be invested in fixed-income securities including government securities and corporate bonds. \u201cWe have submitted our proposal to the for the government for approval of two new life-cycle funds under NPS. We want these additional choices available to the government sector NPS also. The proposal is under very serious discussion in the government. We expect some clarity soon,\u201d Chairman, Pension Fund Regulator and Development Authority (PFRDA), Hemant Contractor, told FeMoney. The two new life-cycle fund proposed by PFRDA has been called the 'Aggressive life cycle fund' with equity allocation of 75 per cent at age 35 and 'Conservative life cycle fund' with equity allocation of 25 per cent at age 35. The only life cycle fund that PFRDA offers at present provides equity allocation of 50 per cent at age 35. The equity component in all these funds reduce with age with a proportionate increase in fixed income investment to ensure safety of retirement funds. The 7th Pay Commission had recommended that the government, in consultation with the PFRDA, provide different life cycle investment options with different investment mix under NPS. \u201cThe Commission recommends that the investment choices under NPS be calibrated on a life-cycle approach and the choices be offered in a simple manner to that any lay person can understand and act accordingly,\u201d the Commission had said. All central government employees who have joined on or after April 1, 2004, have to mandatorily invest 10 per cent of their salary and dearness allowance to NPS to create a pension corpus. The PFRDA constitued G N Bajpai Committee on NPS investment issues too had proposed giving wider options. The Bajpai Committee had said that new life cycle funds should be considered \u201ckeeping the core principle of 'decreasing risk appetite with increasing age\u201d intact with lower and higher ceiling in equity to cater to both conservative subscriber and subscriber with a higher risk appetite.\u201d Justifying higher equity allocation, the Bajpai Committee had said, \u201c The design of the mandated investment norms in vogue today with predominance of low-risk fixed-income securities, that too mainly Government securities, has lower tolerance for risk, but a high tolerance level for lower returns especially in case of the Government Sector employees. This is unfair for investors who may need a combination of low risk with moderate returns or even higher returns with higher risks. This is especially true for those in the early stages of their saving curve. There can be no denying that in the pursuit of risk-free investment, investors are getting the short shrift and are therefore revealing a preference for physical assets.\u201d The panel had also suggested harmonisation of investment guidelines between private and Government sector NPS to bring about a more unified pension regime in the country.