PFRDA allows NPS subscribers to invest up to 75% in equity
Further, it has decided to allow option to allocate 100% of subscriber’s contribution in Asset Class E (Equity) in Tier-II (optional account) under active choice without any conditions of tapering
image for illustrative purpose
Hyderabad: The Pension Fund Regulatory Authority (PFRDA) has revised the equity allocation standards for Tier 1 and Tier II National Pension System (NPS) accounts. This means that NPS subscribers can now invest up to 75 per cent of their funds to equity (E) under active choice without any conditions of tapering from the age of 51 years.
Further, it has been decided to allow option to allocate 100 per cent of subscriber's contribution in Asset Class E (Equity) in Tier-II (optional account) under active choice without any conditions of tapering, the PFRDA said in a circular.
At present, NPS investors have the option, under the NPS-All Citizen Model, to choose any one of the registered Pension Funds and actively allocate their contributions across four asset classes: equity (E), corporate bonds (C), government securities (G), and alternate assets (A) with "Active Choice" option. The following are the maximum allocations to different asset classes:
| Asset Class | Max limit |
| Asset Class G (Government Securities) | 100% |
| Asset Class C (Corporate Bonds) | 100% |
| Asset Class E (Equity) | 75% |
| Asset Class A (Alternate Assets) | 5% |
Prior to the revision announced by the regulator, a subscriber when he/she turned 51, the 75 per cent limit on asset class E was reduced by 2.5 per cent annually and switched to government securities. The age-wise maximum equity limit is based on the following matrix:
| Age | 50 | 51 | 52 | 53 | 54 | 55 | 56 | 57 | 58 | 59 | 60 & above |
| Max Equity | 75 | 72.5 | 70 | 67.5 | 65 | 62.5 | 60 | 57.5 | 55 | 52.5 | 50 |
| Tier –I | |
| Asset Class | Max limit |
| Asset Class G (Government Securities) | 100% |
| Asset Class C (Corporate Bonds) | 100% |
| Asset Class E (Equity) | 75% |
| Asset Class A (Alternate Assets) | 5% |
| Tier-II | |
| Asset Class | Max limit |
| Asset Class G (Government Securities) | 100% |
| Asset Class C (Corporate Bonds) | 100% |
| Asset Class E (Equity) | 100% |
"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.
