The Pension Fund Regulatory and Development Authority (PFRDA) has tweaked investment norms to allow subscribers of National Pension System to change their asset allocation twice in a financial year. However, the choice of change of pension fund manager will be once a year. Here’s how the move will benefit subscribers:
Ü At present, NPS subscribers can change their investments among equity, corporate bonds, and government securities only once a year.
Ü Subscribers get two options for investment – Active where there is flexibility to choose own asset allocation across equity, corporate bonds and government securities or Auto Choice, where the investment is done as per the age.
Ü The new norms come into effect from FY18 beginning April 1.
Ü In the NPS-Corporate Model where the choice of Pension Fund and Investment Options is exercised at corporate level, the corporates will also have the option to change the investment option and also asset allocation ratio twice a year.
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Ü The pension fund regulator has introduced two other investment options: Up to 75% in equity for aggressive investors and up to 25% for conservative investors. Earlier, NPS restricted investment towards equities fund to 50% of contribution amount for both Tier I and Tier II accounts.
Ü However, subscribers can invest up to 100% in corporate bonds or government securities fund.
Ü Currently, only up to 15% of government employees’ funds is invested in stocks.
Ü The regulator is discussing with the government to allow government employees to raise their contribution in stocks, as well as choose even private fund managers under NPS.