PFRDA launches new scheme with higher equity element

The Pension Fund Regulatory and Development Authority (PFRDA) launched a new life cycle scheme under the National Pension System (NPS) on Tuesday that will entail people to invest 50% of their corpus in equity till the age of 45. The move aimed at boosting the pension corpus of the government and private subscribers.

The tapering of equity allocation under the Balanced Life Cycle Fund (BLC) is similar to existing LC50, where the equity is capped at 50% but the equity tapering starts at the age of 45 instead of 35.

“This new life cycle fund focuses on growth assets, particularly equity investments, providing more flexibility and potential for higher returns for NPS subscribers,” the PFRDA said.

The BLC can also be tapped by risk-taking government employees under the proposed Unified Pension Scheme (UPS) looking to get higher returns sans guaranteed pension at the rate of 50% of the average pay of the last 12 months in service. Under UPS, subscribers choosing the default investment option would get a guaranteed pension.

The assets under management (AUM) under the NPS may rise by 28% on year to Rs 15 trillion by end of 2024-25, aided by fresh enrolment of private subscribers and the new life cycle scheme.

The auto choice lifecycle fund would offer an easy option for those private subscribers who do not have the required knowledge to manage their NPS investment.

The proposed scheme is an improvement over the extant LC50 – Moderate Life Cycle Fund which provides a cap of 50% of the total assets for equity investment. The exposure in equity starts with 50% till 35 years of age and gradually reduces as per the age of the subscriber. This extant scheme is also available to the government staff.

Subject to market conditions remain as it is now, the cumulative NPS AUM including Atal Pension Yojana (APY) will likely reach Rs 15 trillion by March 31, 2025.

PFRDA expects to add 13 million new APY subscribers in FY25 and as many as 1.1 million private sector subscribers. PFRDA is making efforts to expand private subscribers base as government sector subscribers are saturated.