UPS, NPS: Major news for UPS and NPS subscribers. The Pension Fund Regulatory and Development Authority (PFRDA) has broadened the investment choices for central government employees under the National Pension System (NPS) and the Unified Pension Scheme (UPS). With the launch of two new auto choice options, members now have six different ways to manage their retirement savings.
Current investment options under NPS, UPS
So far, central government employees had four options to pick from. These included the default scheme, where contributions are allocated based on a set plan, and a choice to invest fully in government securities, which come with lower risk.
Previously, there were two Auto Choice plans. The Life Cycle 25 (Low) plan allowed for 25% equity exposure until age 35, which then decreased to 5% by age 55. The Life Cycle 50 (Moderate) plan provided 50% equity exposure until age 35, tapering down to 10% by age 55. These options let members select a plan that matched their comfort with equity risk.
New Auto Choice options introduced
PFRDA has now rolled out two additional Auto Choice plans to enhance the variety of options available.
Life Cycle 75 (High)
This option offers 75% equity exposure until age 35, with the equity portion gradually decreasing to 15% by age 55. It’s ideal for members who can handle more market fluctuations in return for potentially higher long-term gains.
Life Cycle – Aggressive
This plan keeps 50% equity exposure until age 45, then slowly reduces it to 35% by age 55. It maintains a strong equity base for a longer period, making it a good choice for those seeking growth even in their mid-career years.
What should UPS, NPS members do now?
Employees who prefer not to stay in the default scheme will now need to select from five non-default investment options. They will also have to choose from ten pension funds that are registered with the PFRDA. Members are encouraged to evaluate the scheme’s performance and review the pension fund’s history before making any changes.
Asset allocation rules
As per PFRDA guidelines for the government sector, the maximum limits are as follows:
Maximum 65% in Government securities
Maximum 45% in debt instruments
Maximum 10% in short term loans
Maximum 25% in equity
Maximum 5% in asset-backed or diversified investments
