NPS subscribers get more flexibility on investment choice
Providing greater flexibility to NPS subscribers both in the individual and corporate segments, PFRDA has allowed them to alter their investment scheme choice and asset allocation twice in a financial year instead of once at present.
Come April 1, 2017, subscribers of the National Pension System (NPS) will be allowed to alter their investment scheme choice and asset allocation ratio twice in a financial year instead of once at present.
In a move to provide greater flexibility to NPS subscribers both in the individual and corporate segments, the Pension Fund Regulatory and Development Authority (PFRDA) has issued a communication to all stakeholders in this regard on Wednesday.
However, the facility to change one’s Pension Fund which manages the subscription will remain once in a financial year.
As per present PFRDA guidelines, a subscriber can change his/her existing Pension Fund (PF), the investment option (from active or auto choice) as well as asset allocation ratio only once in a financial year.
Similarly, under the NPS-Corporate model the choice of pension fund and investment options is exercised at corporate level, the corporate also have the option to change the pension fund and investment option to change the pension fund, investment option and also asset allocation ratio once in a financial year.
The asset allocation ratio is the proportion in which investment is spread among available option of equity, corporate bond, government securities and alternative investments.
The PFRDA has said that the preference of investment scheme will be applicable to the existing persons corpus as well as to the prospective subscriptions.. The option will be available separately for Tier-I and Tier-II accounts
A person who does not make a choice of investment option is given an auto choice. This is offered to subscribers who do not have the required knowledge to manage their NPS investments. Under the Auto Choice option, investments will be made in a life-cycle fund. The proportion of funds invested across three asset classes will be determined by a pre-defined portfolio (which would change as per age of subscriber), with the investment in equity decreasing with age of the subscriber and debt portion being increased.
The changes will be applicable from the start of the next financial year.