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NPS: Overview of Active & Auto Investment Choices

NPS (National pension system) offers subscribers two ways to invest in it – a default auto choice for subscribers who find it tough to decide and an active choice for subscribers who wish to take control of their investments.

The difference between active choice and auto choice in NPS is self-explanatory, with the active choice providing greater say and control in the choice of asset allocation and funds. In contrast, the auto choice is suitable for people who prefer a passive investment approach.

You have choice to invest in various asset classes like equity, corporate bonds, and government securities either through Active choice or Auto choice.

Active Choice

- Individual Funds (Asset class E, Asset class C, Asset class G & Asset class A)

Auto Choice

– Life Cycle fund (Aggressive, Moderate (Default) & Conservative)

In Active choice, you have the option to actively decide as to how your NPS contribution is to be invested in the following asset classes:

Sr. No

Asset Class

Particulars

1.

Asset Class E  (Maximum allocation up to 75% of investment)

Investments in predominantly equity market instruments

2.

Asset Class C  (Maximum allocation up to 100% of investment)

Investments   in   fixed    income    instruments   other   than Government securities

3.

Asset Class G (Maximum allocation up to 100% of investment)

Investments in Government securities

4.

Asset Class A (Maximum allocation up to 5% of investment). Note: Investment in Asset Class A is available only for NPS Tier 1 account.

Investment in Commercial or Residential  mortgage based securities, Units issued by Real Estate and/or Infrastructure Investment Trusts and/or  Asset backed securities as regulated by SEBI,  Alternative investment funds (AIF category I & II) registered with SEBI

 

Please note:

1. Upto 50 years of age, the maximum permitted Equity Investment is 75% of the total asset allocation.

2. From 51 years and above, maximum permitted Equity Investment will be as per the equity allocation matrix provided above. The tapering off of equity allocation will be carried out as per the matrix on date of birth.

3. The overall asset class allocation under the 'Active Choice' option should be equal to 100%.

In Auto choice, you have choice to select any 1 of the below mentioned option for your   NPS investment.

Sr. No

Life Cycle

Particulars

A.

Aggressive Life Cycle fund (LC-75)

Maximum investment in equity is restricted to 75%

B.

Moderate Life Cycle fund (LC-50)-Default

Maximum investment in equity is restricted to 50%

C.

Conservative Life Cycle fund (LC-25)

Maximum investment in equity is restricted to 25%

 

 

AUTO CHOICE

Age

Aggressive Life Cycle Fund

Moderate Life Cycle Fund

Conservative Life Cycle Fund

Asset class in (%)

Asset class in (%)

Asset class in (%)

E

C

G

E

C

G

E

C

G

Up to 35 years

75

10

15

50

30

20

25

45

30

40 years

55

15

30

40

25

35

20

35

45

45 years

35

20

45

30

20

50

15

25

60

50 years

20

20

60

20

15

65

10

15

75

55 years

15

10

75

10

10

80

5

5

90

 

 

Bottom line

Whatever the choice, the objective of NPS remains the same – build a retirement corpus which also offers tax deductions on the contributions made under Section 80C of the income tax up to Rs 2 lakh every financial year. 

 

ICICI Securities Ltd. ( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Centre, H. T. Parekh Marg, Churchgate, Mumbai - 400020, India, Tel No : 022 - 2288 2460, 022 - 2288 2470. PFRDA registration numbers:  POP no -05092018. National Pension Scheme is not exchange traded product / service and ICICI Securities Ltd. is just acting as a corporate agent and all disputes with respect to the corporate agency activity would not have access to Exchange investor redressal or Arbitration mechanism. The contents herein above shall not be considered as an invitation or persuasion to trade or invest.  I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon.

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