NPS investors can now invest up to 75% in equity till age of 60

The Pension Fund Regulatory Authority (PFRDA) has increased the ceiling for National Pension System (NPS) under its Active Choice to invest in Asset Class E (equity) investments to a maximum of 75% without any conditions of tapering from the age of 51 years. PFRDA made this announcement via a press release dated October 20, 2022.

Further, the option to allocate 100% of a subscriber's contribution to Asset Class E (Equity) in Tier-II (Optional Account) under the active choice and without any tapering requirements has been decided, as per the PFRDA press release.

Earlier, under the scheme when a subscriber turned 51 years old, the 75% cap on asset class E was reduced by 2.5% annually and switched to government securities.

Under NPS-All Citizen Model, subscribers have the option to select any one of the registered Pension Funds and actively allocate their contributions across 04 Asset Classes, i.e. Equity (E), Corporate Bonds (C), Government Securities (G) and Alternate Assets (A) with ‘Active Choice’ as below:

The age-wise maximum equity limit is based on the following matrix:


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

The revision shall be effective from the date of this circular, stated the press release.

Disclosure of risks involved in NPS
In order to disclose the degree of inherent risk involved, pension funds have created a risk profile of the corresponding schemes under various asset classes. Subscribers have been urged to independently assess the performance of the asset class and the risks involved before selecting the investment scheme or asset class, and to select the investment choice in accordance with the risk profile of the Scheme.

The selection of the appropriate asset classes will play a significant role in deciding the final corpus because NPS is a long-term retirement-focused programme. Previous studies have shown that over the long run, equities have produced stronger inflation-adjusted returns than other asset types.