NPS offers two approaches to invest your money:
- Active choice : Individual funds
- Auto choice : Lifecycle funds
Active choice: The subscriber will have the option to actively decide as to how the NPS pension wealth is to be invested in three asset class, but the investment by an NPS participant in equity would be subject to a cap of 50 per cent.
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Auto Choice: In case the subscriber is unable/ unwilling to exercise any choice as regards to asset allocation, his/her contribution will be invested in accordance with the 'Auto choice' option. In this option the investment will be determined by a predefined portfolio.
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| a) |
At the lowest age of entry (18 years), the auto choice will entail investment of 50% of pension wealth in "E" Class, 30% in "C" Class and 20% in "G" Class.
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| b) |
These ratios of investment will remain fixed for all contributions until the participant reaches the age of 36. From age 36 onwards, the weight in " E" and " C" asset class will decrease annually and the weight in "G" class will increase annually till it reaches 10% in " E", 10% in "C" and 80 % in " G" class.
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| c) |
Under this approach , the funds of the participants who do not have the sufficient knowledge to manage their NPS investments are managed by the PFM's of their own choice. |
PFM will manage separate schemes , each investing in 3 different classes
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| Asset Class E (Equity Market Instruments): The investment would be subject to a cap of 50%. This asset will be invested in index funds that replicate the portfolio of a particular index. |
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Asset Class C (Credit Risk Bearing Fixed Income Instruments): This asset class will be invested in the:- |
- Liquid Funds of AMC's regulated by SEBI.
Fixed deposits of scheduled commercial banks
Debt securities with maturity of not less than 3 yrs tenure issued by Bodies Corporate.
Credit Rated Public Financial Institutions/ PSU Bonds
- Credit Rated Municipal Bonds/ Infrastructure Bonds
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| Asset Class G (Government Securities): This asset class will be invested in Central Government Bonds & State Government Bonds. |
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