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Investment Options under NPS
By Anupama Deshpande | May 28, 2018

NPS offers you the flexibility to design your own portfolio based on your preference. Except from government employees, all other NPS subscribers can select from 2 investment options offering allocation to different funds. These offers are Active Choice and Auto Choice.



Suggested reading All about Senior Citizen Savings Scheme (SCSS)

Investment Options under NPS

Four asset classes are available under NPS:

  1. Alternative investment schemes such as real estate investment trusts, infrastructure investment trusts or alternative investment funds (A)
  2. Equity Fund (E)
  3. Government Securities Fund (G)
  4. Fixed Income Instruments other than Govt. Securities (C)

Suggested reading Types of Risks Associated with Mutual Fund Investments

Following Investment Options are available under NPS:

Investment Option (1): Active Choice

  • Under this option, subscriber selects the allocation pattern amongst the three funds Equity (E), Corporate Debt (C) and Government Securities (G).
  • Apart from three available asset classes viz. E, C and G, you also have an option of a fourth fund which is Alternate Investment Fund (A). Like the three asset classes, investment in A is optional.
  • Under Alternate Investment Fund (A) option, subscriber's minimum allocation can be 1% and the maximum allocation can be 5%.
  • Under Equity Fund option, subscriber is allowed to invest only up to 50% of contribution amount.
  • Subscriber can invest 100% of contribution to Government Securities or Corporate Bond Fund.
  • While asset classes remain the same for all subscribers, the allocations can change based on what the investor prefers and on its percentage.
  • Subscriber can have different asset allocation patterns for Tier I and Tier II accounts.

Suggested reading How to Open an NPS Account Online?

Investment Option (2): Auto Choice:

  • Under this option, subscriber funds are automatically allocated amongst three funds E, C and G in a per pre-defined portfolio pattern prescribed by PFRDA (Pension Fund Regulatory and Development Authority).
  • If you opt for 'Auto Choice', your fund will be invested as per the Life cycle fund matrix designed by experts.
  • There are 3 options of Life Cycle funds which are "Moderate Life Cycle Fund", "Aggressive Life Cycle Fund" and "Conservative Life Cycle Fund".
  • The "Moderate Life Cycle Fund" option provides you with the option of a Life Cycle fund with a reasonable risk profile where the maximum equity allocation is kept at 50% upto the age of 35 years. The "Aggressive Life Cycle Fund" option provides you with maximum equity allocation of 75% upto the age of 35 years
  • The "Conservative Life Cycle Fund" option provides you with maximum equity allocation of 25% upto the age of 35 years.

The detailed age-wise asset allocation for all three Life Cycle Funds is given below:

Aggressive Life Cycle Fund

AgeAssetClass EAssetClass CAssetClass G
Up to 35 years75%10%15%
36 years71%11%18%
37 years67%12%21%
38 years63%13%24%
39 years59%14%27%
40 years55%15%30%
41 years51%16%33%
42 years47%17%36%
43 years43%18%39%
44 years39%19%42%
45 years35%20%45%
46 years32%20%48%
47 years29%20%51%
48 years26%20%54%
49 years23%20%57%
50 years20%20%60%
51 years19%18%63%
52 years18%16%66%
53 years17%14v69%
54 years16%12%72%
55 years and above15%10%75%

Moderate Life Cycle Fund

AgeAssetClass EAssetClass CAssetClass G
Up to 35 years50%30%20%
36 years48%29%23%
37 years46%28%26%
38 years44%27%29%
39 years42%26%32%
40 years40%25%35%
41 years38%24%38%
42 years36%23%41%
43 years34%22%44%
44 years32%21%47%
45 years30%20%50%
46 years28%19%53%
47 years26%18%56%
48 years24v17%59%
49 years22%16%62%
50 years20%15%65%
51 years18%14%68%
52 years16%13%71%
53 years14%12%74%
54 years12%11%77%
55 years and above10%10%80%

Conservative Life Cycle Fund

AgeAssetClass EAssetClass CAssetClass G
Up to 35 years25%45%30%
36 years24%43%33%
37 years23%41%36%
38 years22%39%39%
39 years21%37%42%
40 years20%35%45%
41 years19%33%48%
42 years18%31%51%
43 years17%29%54%
44 years16%27%57%
45 years15%25%60%
46 years14%23%63%
47 years13%21%66%
48 years12%19%69%
49 years11v17%72%
50 years10%15%75%
51 years9%13%78%
52 years8%11%81%
53 years7%9%84%
54 years6%7%87%
55 years and above5%5%90%
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About Anupama Deshpande
Anupama is a Co-Founder of CodeForBanks.com. She is an MBA (Finance) and Chartered Financial Analyst (CFA). She also carries a Fellowship degree in Life Insurance Sector and is a Master of Computer Application (MCA). She is an expert in Finance Field with an experience of over 18 years on different managerial positions in finance industry including Stock Market, Depository and Mutual Fund Sectors. Apart from that she has remained for few years in the field of marketing as well. Her suggestions and advice for investments have been very useful to many people.
Her vast interest & expertise in the field of finance have encouraged her to write the articles so that others can also get benefitted out of them. She never loses any opportunity to learn and be creative. She is a valuable asset for CodeForBanks.com & important resource to all those around her.

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