The new Auto Choice investment options include ‘Auto Choice – Life Cycle 75- High (15E/55Y)’ and ‘Auto Choice – Life Cycle- Aggressive (35E/55Y)’.
The Pension Fund Regulatory and Development Authority (PFRDA) has expanded the number of investment options available under the National Pension System (NPS) and Unified Pension Scheme (UPS). PFRDA has introduced two new auto-choice investment options, bringing the total number of investment options for Central Government (CG) subscribers to six. The new auto-choice investment options include ‘Auto Choice – Life Cycle 75 – High (15E/55Y)’ and ‘Auto Choice – Life Cycle – Aggressive (35E/55Y).’ This move by PFRDA will directly benefit government employees, allowing them to choose new investment options under the pension scheme.
Currently, four investment options are available for NPS and UPS Central Government subscribers:
Default Scheme: Contributions are invested according to a pre-determined asset allocation pattern managed by three pension funds.
Active Choice (100% G-Sec): Investment only in Government Securities.
Auto Choice – Life Cycle 25 – Low (5E/55Y): 25% of the subscriber’s contribution is invested in equities until they turn 35, and the equity allocation subsequently reduces to 5% at age 55, and continues until exit.
Auto Choice – Life Cycle 50 – Moderate (10E/55Y): 50% of the subscriber’s contribution is invested in equities until they turn 35, and the equity allocation subsequently reduces to 10% at age 55, and continues until exit.
What will the new investment option include?
Auto Choice – Life Cycle 75 (High): 75% of contributions will be invested in equities until age 35, gradually reducing to 15% by age 55. This option is designed for subscribers who are comfortable with higher market-linked volatility, in return for potentially higher long-term returns.
Auto Choice – Life Cycle – Aggressive: 50% of contributions will be invested in equities until age 45, reducing to 35% by age 55. The higher equity floor differentiates this option from the existing one and is designed for subscribers who want a growth-oriented portfolio even in their mid-career.
The regulator has advised subscribers to review the scheme’s performance and pension fund track record before making any scheme changes. Updated data on scheme-wise and fund-wise returns is available on the NPS Trust website.
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