NPS new rule: Here's all you need to know about equity investments in National Pension System
The Pension Fund Regulatory Authority (PFRDA) has recently revised the equity allocation standards for National Pension System (NPS) accounts. As a result, NPS subscribers can now invest up to 75 percent of their funds to equity (E) under active choice without any conditions of tapering from the age of 51 years as earlier.
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Further, PFRDA has decided to allow an option to allocate 100 percent of a subscriber's contribution to Asset Class E (Equity) in Tier-II (Optional Account) under the active choice without any conditions of tapering from the age of 51 years.
Under NPS-All Citizen Model, as of now subscribers have the option to select any one of the registered pension funds and actively allocate their contributions across 04 Asset Classes, i.e. Equity (E), Corporate Bonds (C), Government Securities (G) and Alternate Assets (A) with ‘Active Choice’ as below:
A subscriber when he/she turned 51, the 75 percent limit on asset class E was reduced by 2.5 percent annually and switched to government securities. The age-wise maximum equity limit is based on the following matrix:
However, the limits on asset class exposure will now be imposed on Tier I customers in the private sector and on all Tier II subscribers are listed below:
PFRDA further said that pension funds have prepared risk profiling of the respective schemes under different asset classes to disclose the level of inherent risks involved.
"Before choosing the investment scheme/asset class, subscribers are advised to independently evaluate the performance of asset class and the risks involved and choose the investment option according to the risk profile of the scheme," the regulator said.
For the uninitiated, National Pension System or NPS, a government-run investment scheme, gives the subscriber the option to set the preferred allocation to different asset classes.
NPS offers two kinds of accounts — Tier 1 and Tier 2 — for instruments including government bonds, equity market, and corporate debt.
While the Tier 1 NPS account is strictly a pension account, the Tier 2 account — known as an investment account — is voluntary savings account associated with the Pension Regulatory Authority of India (PRAN).
(Edited by : Abhishek Jha)