The National Pension System (NPS) is a voluntary, defined contribution retirement savings scheme that enables subscribers to make the best decisions for their future by making systematic savings throughout their working lives. NPS aims to instil in citizens the habit of saving for retirement. It is an attempt to find a long-term solution to the problem of providing adequate retirement income to every Indian citizen.

When registering in the CRA system under NPS, an NPS Subscriber must select the Pension Fund Manager (PFM) as well as the scheme preference. The Subscriber has several options from which to choose.

There are multiple PFMs in NPS, as well as investment options (automatic or active) and four asset classes, namely equity, corporate debt, government bonds, and alternative investment funds. The Subscriber first selects the PFM, and after that, the Subscriber has the option of selecting any of the Investment Options.

# Investment Options

The Subscriber must choose between Active Choice and Auto Choice for his or her investment.

1. Active Choice : Individual funds

In this type of investment option, the Subscriber has the right to actively choose how his or her contribution is invested, based on personal preference. The Subscriber must provide the PFM, Asset Class, and percentage allocation for each scheme of the PFM.

There are 4 Asset Classes 
‌Equity and Asset Classes - Asset Class E
‌Corporate Debt - Asset Class C
‌Government Bonds - Asset Class G
‌Alternative Investment Funds - Asset Class A

There are certain age restrictions subject to asset allocation-

‌* From the age of 51 and up, the maximum permitted equity investment will be following the equity allocation matrix .The tapering off of equity allocation will be carried out in accordance with the matrix based on the Subscriber's date of birth.

‌* For Alternative Investment Funds, the percentage contribution value cannot exceed 5%.

‌* The total allocation across the asset classes E, C, G, and A must be 100%


2. Auto choice : Lifecycle Fund

NPS subscribers who are unable to choose their own asset allocation can select the Auto choice option (life stage investing option). This option allocates funds based on the age of the subscriber. There are three risk-based investment options under the Auto choice option: LC 25, LC 50, and LC 75.

A. LC 25 - Conservative Life Cycle Fund

   The LC25 imposes a 25% cap on total asset allocation in asset class E. As the subscriber ages, his or her exposure to equity investments decreases gradually.

B. LC 50 - Moderate Life Cycle Fund

   The LC50 imposes a 50% cap on total asset allocation in asset class E. As the subscriber ages, his or her exposure to equity investment decreases gradually. 

C. LC 75 - Aggressive Life Cycle Fund

   The LC75 imposes a 75% cap on total asset allocation in asset class E. As the subscriber ages, his or her exposure to equity investment decreases gradually. 

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The National Pension System (NPS) is a voluntary, defined contribution retirement savings scheme that enables subscribers to make the best decisions for their future by making systematic savings throughout their working lives. NPS aims to instil in citizens the habit of saving for retirement. It is an attempt to find a long-term solution to the problem of providing adequate retirement income to every Indian citizen.

What is NPS

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