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NPS: Overview of Active & Auto Investment Choices

5 Mins 23 Feb 2021 0 COMMENT 14 LIKES

NPS (National pension system) offers subscribers two ways to invest in it – a default auto choice for subscribers who find it tough to decide and an active choice for subscribers who wish to take control of their investments.

The difference between active choice and auto choice in NPS is self-explanatory, with the active choice providing greater say and control in the choice of asset allocation and funds. In contrast, the auto choice is suitable for people who prefer a passive investment approach.

You have choice to invest in various asset classes like equity, corporate bonds, and government securities either through Active choice or Auto choice.

Active Choice

- Individual Funds (Asset class E, Asset class C, Asset class G & Asset class A)

Auto Choice

– Life Cycle fund (Aggressive, Moderate (Default) & Conservative)

In Active choice, you have the option to actively decide as to how your NPS contribution is to be invested in the following asset classes:

Sr. No	Asset Class	Particulars
1.	Asset Class E (Maximum allocation up to 75% of investment)	Investments in predominantly equity market instruments
2.	Asset Class C (Maximum allocation up to 100% of investment)	Investments in fixed income instruments other than Government securities
3.	Asset Class G (Maximum allocation up to 100% of investment)	Investments in Government securities
4.	Asset Class A (Maximum allocation up to 5% of investment). Note: Investment in Asset Class A is available only for NPS Tier 1 account.	Investment in Commercial or Residential mortgage based securities, Units issued by Real Estate and/or Infrastructure Investment Trusts and/or Asset backed securities as regulated by SEBI, Alternative investment funds (AIF category I & II) registered with SEBI

Please note:

1. Upto 50 years of age, the maximum permitted Equity Investment is 75% of the total asset allocation.

2. From 51 years and above, maximum permitted Equity Investment will be as per the equity allocation matrix provided above. The tapering off of equity allocation will be carried out as per the matrix on date of birth.

3. The overall asset class allocation under the 'Active Choice' option should be equal to 100%.

In Auto choice, you have choice to select any 1 of the below mentioned option for your NPS investment.

Sr. No	Life Cycle	Particulars
A.	Aggressive Life Cycle fund (LC-75)	Maximum investment in equity is restricted to 75%
B.	Moderate Life Cycle fund (LC-50)-Default	Maximum investment in equity is restricted to 50%
C.	Conservative Life Cycle fund (LC-25)	Maximum investment in equity is restricted to 25%

AUTO CHOICE
Age	Aggressive Life Cycle Fund			Moderate Life Cycle Fund			Conservative Life Cycle Fund
	Asset class in (%)			Asset class in (%)			Asset class in (%)
	E	C	G	E	C	G	E	C	G
Up to 35 years	75	10	15	50	30	20	25	45	30
40 years	55	15	30	40	25	35	20	35	45
45 years	35	20	45	30	20	50	15	25	60
50 years	20	20	60	20	15	65	10	15	75
55 years	15	10	75	10	10	80	5	5	90

Bottom line

Whatever the choice, the objective of NPS remains the same – build a retirement corpus which also offers tax deductions on the contributions made under Section 80C of the income tax up to Rs 2 lakh every financial year.

ICICI Securities Ltd. ( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Centre, H. T. Parekh Marg, Churchgate, Mumbai - 400020, India, Tel No : 022 - 2288 2460, 022 - 2288 2470. PFRDA registration numbers: POP no -05092018. National Pension Scheme is not exchange traded product / service and ICICI Securities Ltd. is just acting as a corporate agent and all disputes with respect to the corporate agency activity would not have access to Exchange investor redressal or Arbitration mechanism. The contents herein above shall not be considered as an invitation or persuasion to trade or invest. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon.