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Vipul Das

PFRDA revises equity exposure permitted in NPS for Tier I and Tier II accounts

NPS subscribers currently 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 (Photo: iStock)

NPS subscribers currently 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:

NPS Asset Class (npscra.nsdl.co.in)

However, when a subscriber reaches the age of 51, the 75% cap on asset class E is lowered by 2.5% annually and reallocated to government securities. The following matrix serves as the basis for the age-based maximum equity threshold:

NPS age wise maximum equity limit (npscra.nsdl.co.in)

“In partial modification to the above-mentioned circular, it has been decided by the Authority to allow option to allocate 75% of subscriber’s contribution in Asset Class E (Equity) in Tier-I 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% of subscriber’s contribution in Asset Class E (Equity) in Tier-II (optional account) under active choice without any conditions of tapering," PFRDA said in a circular dated October 20, 2022.

The restrictions on asset class exposure that will now be imposed on Tier I subscribers in the private sector and on all Tier II subscribers are listed below:

NPS asset class wise exposure limits (npscra.nsdl.co.in)

“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 risk profiling of the schemes is available on the websites of respective Pension Funds and website of NPS Trust," the regulator said.

The Pension Fund Regulatory and Development Authority (PFRDA) has also released guidelines on how to handle deceased subscribers' NPS corpus after it has been discovered that in some cases, subscribers had tragically passed away after receiving a lump sum but before annuities were issued, and the funds allocated for annuities were in the CRA System.

ABOUT THE AUTHOR

Vipul Das

Vipul Das is a Digital Business Content Producer at Livemint. He previously worked for Goodreturns.in (OneIndia News) and has over 5 years of expertise in the finance and business sector. Stocks, mutual funds, personal finance, tax, and banking are among his specialties, and he is a professional in industry research and business reporting. He received his bachelor's degree from Dr. CV Raman University and also have completed Diploma in Journalism and Mass Communication (DJMC).
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