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National Pension System (NPS)

NPS is a market-linked defined contribution scheme that helps you save for your retirement. The scheme is simple, voluntary, portable and flexible. It is one of the most efficient ways of boosting your retirement income and saving tax. It allows you to plan for a financially secure retirement with systematic savings in a planned way.

Types Of Accounts : NPS scheme is structured into two tiers (Tier-I account & Tier-II account ).

Asset Classes : You need to choose the asset classes as well Pension Fund Manager (PFM) along with the percentage allocation to be done in each scheme.

There are four asset classes from which the allocation is to be specified under a single PFM

  • Asset Class E – Equity and related instruments

  • Asset Class C – Corporate debt and related instruments

  • Asset Class G – Government Bonds and related instruments

  • Asset Class A - Alternative Investment Funds including instruments like CMBS, MBS, REITS, AIFs, Invlts etc

While choosing the asset class, subscribers must note that

  • Percentage contribution value cannot exceed 5% for Alternative Investment Funds

  • The total allocation across E, C, G and A asset classes must be equal to 100%.

  • For Tier-II, you can allocate 100% to Equity.

  • For Tier-I, you can allocate 75% to Equity.

Investment Choices : 

  • Active Choice : Under Active Choice, you can plan and choose on how your contribution is to be invested. You can choose the PFM, the scheme(s) as well as the percentage allocation in the asset classes.

  • Asset Class (E)  |  Maximum allocation of investment in the asset class is Up to 75%

  • Asset Class (C)  |  Maximum allocation of investment in the asset class is Up to 100%

  • Asset Class (G)  |  Maximum allocation of investment in the asset class is Up to 100%

  • Asset Class (A)  |  Maximum allocation of investment in the asset class is Up to 5%

  • Auto Choice : NPS offers an easy option for you to invest in a Life-cycle fund in which the proportion of funds invested across three asset classes that are determined by a pre-defined portfolio and would change as per your age. As age increases, your exposure to Equity and Corporate Debt tends to decrease under Auto Choice. Depending upon your risk appetite, there are three different options available within ‘Auto Choice’ – Aggressive, Moderate and Conservative.

  • LC75 – Aggressive Life Cycle Fund

  • LC50 – Moderate Life cycle fund

  • LF25 – Conservative Life cycle fund

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