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What Are Active And Auto Choice Options For NPS Investments?

In the National Pension System (NPS), you can choose a Pension Fund Manager (PFM) from multiple options, each with its own approach to managing pension funds.

October 13, 2023
October 13, 2023
Active And Auto Choice

Active And Auto Choice

When signing up for the National Pension System (NPS), subscribers will have to make some important decisions. They need to pick a Pension Fund Manager (PFM) and decide on their investment strategy. The good news is that they have a range of choices available from Active and Auto choice options for NPS investments.

In the NPS, you can choose from multiple PFMs, each with its own approach to managing your pension funds. Additionally, subscribers can decide on their investment strategy, which includes the choice between “Auto” or “Active” options. There are also four different asset classes to consider: Equity, Corporate Debt, Government Bonds, and Alternative Investment Funds.

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The process begins with selecting a PFM, and after that, subscribers can decide on their preferred investment option, allowing individuals to tailor their NPS investments to suit their financial goals.

Select A Pension Fund Manager (PFM)

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Under NPS, it is mandatory for subscribers to select one PFM from the following options:

  1. Birla Sunlife Pension Management Limited
    2. HDFC Pension Management Company Limited
    3. ICICI Prudential Pension Funds Management Company Limited
    4. Kotak Mahindra Pension Fund Limited
    5. LIC Pension Fund Limited
    6. Reliance Capital Pension Fund Limited
    7. SBI Pension Funds Private Limited
    8. UTI Retirement Solutions Limited

Investment Options

The subscriber must select either active or auto-choice options to invest in NPS.

Active Choice:

In this option, the subscriber has the right to decide how the contribution can be invested. The subscriber is required to provide the PFM, asset class and the percentage of allocation in each scheme. Asset classes are of four types:

  • Asset Class E- Equity and related instruments
  • Asset Class C- Corporate debt and related instruments
  • Asset Class G- Government bonds and related instruments
  • Asset Class A- Alternative investment funds like CMBS, MBS, REITs, AIFs, InvITs, etc.

Furthermore, the subscriber can select multiple asset classes under a single PFM, as mentioned below:

  • Up to 50 years of age, the maximum permitted equity investment is 75 per cent of the total asset allocation.
  • For 51 years and above, the maximum permitted equity investment will be as per the equity allocation matrix. The tapering off of equity allocation will be carried out as per the matrix on the date of birth of the subscriber.
  • Percentage contribution value cannot exceed 5 per cent for alternative investment funds.
  • The total allocation across E, C, G, and A asset classes must be equal to 100 per cent.


Auto Choice:

It offers convenience for subscribers who do not know how to manage their investments. Here, the investments will be made in life-cycle funds. The proportion of funds invested across three asset classes will be determined by a pre-defined portfolio (which would change as per the age of the subscriber).

For a subscriber who may want to reduce exposure to risky investment options as he/she gets older, Auto Choice can be the better option of the two. With the increase in age, the person’s individual exposure to equity and corporate debt tends to decrease. There are three options available within ‘Auto Choice’ – Aggressive, Moderate and Conservative.

LC75- Aggressive Life Cycle Fund: This provides a cap of 75 per cent of the total assets for equity investment. The equity exposure starts at 75 per cent of the assets till 35 years of age and gradually reduces as per the subscriber’s age.

LC50 – Moderate Life Cycle Fund: This fund provides a cap of 50 per cent of the total assets for equity investment. The equity exposure starts at 50 exposure of the total assets till 35 years of age and gradually reduces as per the subscriber’s age.

LC25 – Conservative Life Cycle Fund: This fund provides a cap of 25 per cent of the total assets for equity investment. The exposure in equity investments starts at 25% till 35 years of age and gradually reduces as per the age of the subscriber.

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