Back75%: the portion of your pension fund you will be able to invest in equity
You can choose your asset allocation across these three funds, but you can't put more than 50% in the equity fund
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Soon you will be able to invest 75% of your pension fund in equity, through the National Pension System (NPS).
The Pension Fund Regulatory and Development Authority (PFRDA) will offer two new life-cycle funds for NPS subscribers: aggressive life cycle fund with equity allocation of 75% at the age of 35 years and a conservative life cycle fund with equity allocation of 25% at that age.
Currently, however, investments in equity are limited to 50% for the private sector NPS.
As of now, there are three funds on offer: scheme G invests in government securities (g-secs), scheme C in fixed income products (other than g-secs) and scheme E is the equity funds.
You can choose your asset allocation across these three funds, but you can’t put more than 50% in the equity fund. Other than these individual funds, NPS also offers a life cycle-based fund under auto choice, which starts with the maximum exposure to equity in the younger days and reduces this exposure as you inch closer to retirement.
So, till you are 35, 50% of your money remains invested in equity, 30% in scheme C and the balance 20% in scheme G. The equity allocation tapers every year till 55 years of age. It then remains fixed at 10% in scheme E, 10% in scheme C and 80% in scheme G till retirement.
The G.N. Bajpai committee, which reviewed the investment framework of NPS, recommended allowing complete freedom to the investor to decide equity allocation. But it recommended opening this up in phases: starting by increasing the equity exposure to 75% through the life cycle fund in the first phase, then 75% allocation in the active choice and finally lifting the cap altogether.
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