Central government employees investing in the National Pension System (NPS) and Unified Pension Scheme (UPS) will now have more say in how their retirement money is managed.
The Pension Fund Regulatory and Development Authority (PFRDA) has expanded the number of investment choices from four to six, giving subscribers more flexibility based on their risk appetite.
“PFRDA hereby notifies the expansion of the existing investment choice options under the NPS and UPS for central government (CG) employees. Two additional auto investment choice options have been introduced, thereby increasing the total number of available choices to six,” the pension fund regulator said in a release.
Till now, most government employees were parked in the ‘Default Scheme’. Only about 4% of central government subscribers had chosen anything different.
What is ‘Default Scheme’?
Under the scheme, contributions are invested as per the predefined asset allocation pattern managed by three pension funds.
But with the latest notification from the Finance Ministry, PFRDA has added two new auto choice options that offer higher equity exposure for those willing to take more market-linked risk for potentially higher long-term returns.
What’s new?
Government subscribers can now choose from six investment options:
Default Scheme – the usual pre-set allocation managed by three pension funds
Active Choice (100% G-Sec) – for those who prefer complete safety
Auto Choice LC 25 – Low – 25% equity till age 35, tapering to 5% by age 55
Auto Choice LC 50 – Moderate – 50% equity till age 35, tapering to 10% by age 55
NEW: Auto Choice LC 75 – High – 75% equity till age 35, tapering to 15% by age 55
NEW: Auto Choice LC – Aggressive – 50% equity till age 45, tapering to a relatively high 35% by age 55
The two new options cater to investors who want more equity exposure for a longer period, especially younger employees who wish to build a larger corpus through market growth.
What NPS subscribers need to do
Employees who wish to move away from the Default Scheme must select one of the five non-default investment options, and choose one pension fund from the ten PFRDA-registered fund managers.
PFRDA has advised subscribers to review scheme performance and take informed decisions. Updated returns of schemes and pension funds are available on the NPS Trust website.
The regulator has also refreshed the naming convention of Life Cycle (Auto Choice) funds to better match their asset allocations and age-based tapering structure.
New options are now active on CRA platforms
The two new choices are already active on the Central Recordkeeping Agency (CRA) platforms, meaning government employees can start selecting the new options right away.
