NPS Schemes
As per the NPS investment guidelines, pension fund managers manage three separate schemes, each investing in a different asset class. The three asset classes are equity (E), government securities (G) and credit risk-bearing fixed-income instruments (C). E Class: Here the investment is mainly in equity. The fund managers invest in Index funds that replicate the portfolio of either BSE Sensex or NSE Nifty 50. G Class: Here the investment is in government securities like Government of India bonds and state government bonds. C Class: Here the investment is in fixed-income securities with credit risk – that is, securities other than government securities.
The subscriber has the option to decide how the money is to be invested in the three asset classes. This is called ‘active choice’. On the other hand, if the subscriber does not exercise any option, the contribution will be invested in accordance with the ‘auto choice’ option. This option has a predefined portfolio wherein, at the lowest age of entry of 18 years, the allocation will be 50 per cent in E Class, 30 per cent in C and 20 per cent in G. This ratio is applicable till 36 years of age.
From 36 onwards, the weight in E and C asset classes decreases and the weight in G Class increases annually till it reaches 10 per cent in E, 10 per cent in C and 80 per cent in G at 55 years of age. The ‘auto choice’ option is based on the time-tested truism that though risky in the short run, equities beat all other asset classes in the long run.
When to Withdraw?
subscriber can withdraw 60 per cent of the amount as lump-sum; the balance 40 per cent should be invested in life-annuity schemes that will serve as pension. 60 years (taking VRS or for any other reason), you will receive 80 per cent of the accumulated pension wealth as annuity pension every month, while 20 per cent of the pension fund will be repaid in one lump-sum. subscriber at any time during the subscribed period, the entire accumulated pension wealth shall be paid to the nominee/legal heir of the deceased. No annuity pension is payable thereafter. 2013) for partial withdrawal not exceeding 25 per cent of the contribution made by the subscriber subject to certain conditions/regulations.