The Pension Fund Regulatory and Development Authority (PFRDA) has revised the equity allocation rules for Tier 1 and Tier II National Pension System (NPS) accounts. As per the new rule, subscribers will be able to allocate up to 75% of their fund in Equity (E) under active choice without any conditions of tapering from the age of 51 years.
Currently, under the NPS-All Citizen Model, subscribers have to select any one of the registered Pension Funds and actively allocate their contributions across four asset classes – Equity (E), Corporate Bonds (C), Government Securities (G) and Alternate Assets (A) with ‘Active Choice’. The maximum limits for allocation to these asset classes are:
Asset Class G (Government Securities): 100%
Asset Class C (Corporate Bonds):100%
Asset Class E (Equity): 75%
Asset Class A (Alternate Assets): 5%
However, the limit of 75% on asset class E gets tapered off at the rate of 2.5% every year and is re-allocated to Government securities when the subscriber attains 51 years of age.
The age-wise maximum equity limit is based on the following matrix:
| Age | 50 | 51 | 52 | 53 | 54 | 55 | 56 | 57 | 58 | 59 | 60 & above |
| Max Equity | 75 | 72.5 | 70 | 67.5 | 65 | 62.5 | 60 | 57.5 | 55 | 52.5 | 50 |
“In partial modification to the above-mentioned circular, it has been decided by the Authority to allow option to allocate 75% of subscriber’s contribution in Asset Class E (Equity) in Tier-I under active choice without any conditions of tapering from the age of 51 years,” PFRDA said in a circular dated October 20, 2022.
The regulator has also decided to allow the option to allocate 100% of the subscriber’s contribution in Asset Class E (Equity) in Tier-II (optional account) under active choice without any conditions of tapering.
Also Read: Step-by-step guide to open NPS account and update address using Driving License through DigiLocker
The Asset class wise exposure limits that will now be applicable to private sector subscribers under Tier I and to all subscribers in Tier II are tabulated below:
| Tier –I | |
| Asset Class | Max limit |
| Asset Class G (Government Securities) | 100% |
| Asset Class C (Corporate Bonds) | 100% |
| Asset Class E (Equity) | 75% |
| Asset Class A (Alternate Assets) | 5% |
| Tier-II | |
| Asset Class | Max limit |
| Asset Class G (Government Securities) | 100% |
| Asset Class C (Corporate Bonds) | 100% |
| Asset Class E (Equity) | 100% |
“Before choosing the investment scheme/asset class, subscribers are advised to independently evaluate the performance of asset class and the risks involved and choose the investment option according to the risk profile of the Scheme,” the regulator said.