Picking Asset Allocation for Your NPS Investments
The National Pension System (NPS) is a voluntary, defined contribution retirement savings plan created to help members make the best choices for their future via methodical saving throughout their working lives. The NPS aims to help persons develop the habit of saving for their retirement.
Pension Fund Manager(PFM)
The subscriber has to choose one from the following PFMs:-
- Aditya Birla Sunlife Pension Management Limited
- HDFC Pension Management Company Limited
- ICICI Prudential Pension Funds Management Company Limited
- Kotak Mahindra Pension Fund Limited
- LIC Pension Fund Limited
- Reliance Capital Pension Fund Limited
- SBI Pension Funds Private Limited
- UTI Retirement Solutions Limited
- Tata Pension Management Limited
- Axis Pension Fund Management Limited
- Max Life Pension Fund Management Limited
Asset Classes
There are 3 Asset Classes under which the funds are allocated-
1. Equity and Asset Classes - Asset Class E
2. Corporate Debt - Asset Class C
3. Government Bonds - Asset Class G
Modes of Investment in NPS
The subscriber has to choose between one of Active or Auto investment options.
Active :- Here, the subscriber has maximum control of how his/her funds are being allocated. The subscriber has to provide the Pension Fund Manager(PFM) and the asset class as well as the percentage allocation.
Auto :- Under this, the subscribers don't have to make any asset allocation decisions. The investments are made under one of the following three available Life Cycle Funds.
LC 25 :- Conservative Life Cycle Fund. It has a 25% cap on the Class E allocation which keeps tapering as the subscriber ages.
LC 50 :- Moderate Life Cycle Fund. It has a 50% cap on the Class E allocation which further reduces year on year.
LC 75 :- Aggressive Life Cycle Fund. It has a 75% cap on the Class E allocation which keeps decreasing.
Choosing the right allocation
Here are some guidelines to assist you in choosing the appropriate asset allocation strategy for your NPS savings:
You can and should be aggressive with your retirement savings if you are young, in your 30s or early 40s (unless you are a conservative saver). As a result, equities should account for a large portion of your investment portfolio. If you are in your mid-40s or older and already have a significant allocation to debt savings (via EPF and PPF), you can have NPS with a high equity allocation (as high as permitted), so that your overall retirement portfolio has a reasonable equity allocation. However, if your PF corpus is small and you have a lot of money in equity funds, you can be conservative with NPS and treat it as part of the debt side of your retirement corpus.
These are broad approaches. Because everyone has different needs, the actual approach will be different for everyone.
How can PensionBox help?
PensionBox not only helps you track your investments, but allows you to flexibly invest in NPS, NPS Subscribers gets exclusive tax benefits for investment up to Rs. 50,000 in (Tier I account) under subsection 80CCD (1B). This is over and above the deduction of Rs. 1.5 lakh available under section 80C of Income Tax Act.
Why wait, Start saving taxes today!
PensionBox simplifies the National Pension System(NPS), the government's pension scheme for private employees both for retail users and HRs/companies.
If you don’t have an NPS account, you can simply open your pension account within 2 minutes and if you have NPS PRAN already, you will be able track, invest and manage everything free of charge with best user experience.
We never touch or hold your money directly, your investments go safely to your chosen pension fund through approved channels.
We are built with Zerodha as POP , ensuring transparency, data security, and peace of mind. Your retirement savings are protected by regulation and secured by technology.
That’s why, PensionBox brings transparency, zero charges, timely support and freedom to select any pension fund so that you get the best experience investing in NPS & be better future ready.
That’s not it, we help you & your company together to maximise contribution and tax savings with minimal charges & best user experience.
If you are an existing zerodha user then you get a fast login or sign up using kite ID.
Once you are onboarded with kite ID, you get free access to
- Open NPS in 2 minutes
- Track existing NPS
- POP shift or CRA shifting
- Invest in one time or create SIP in NPS
- Withdraw NPS requests & instant withdraw tier 2
- Create your dream retirement plan
- Open NPS Vatsalya for your kid
- Share with HR (To unlock more tax benefits)
- Employer Contribution:
- Contributions made by your employer to your NPS account are tax-free up to 14% of your basic salary under Section 80CCD(2). Do connect us with your HR to enable this for you.
Tax Benefits in Old Tax Regime - Self-Contribution:
- Deduction up to ₹1.5 lakh under Section 80C.
- Additional deduction of ₹50,000 under Section 80CCD(1B) — exclusive to NPS investments!
- This allows you to claim a total deduction of up to ₹2 lakh every year on your NPS contributions.
- Employer Contribution:
- Contributions made by your employer to your NPS account are tax-free up to 10% of your basic salary (Basic + DA) under Section 80CCD(2). Do connect us with your HR to enable this for you.
- This is over and above your personal deduction limits, giving you extra tax efficiency.
Feel free to book a free call to learn more about NPS, NPS Vatsalya, Corporate NPS & PensionBox or contact the support team.
