The National Pension System (NPS) offers various investing options for investors through the active and auto modes. For example, in the active mode, the investor can decide the investment amount in each asset class under the NPS ecosystem, subject to the maximum upper limit. However, in the auto mode, they can only choose the plan options; the rest is handled by the empanelled fund managers selected by the Pension Fund Regulatory Development Authority.

Here are two modes of investment options under NPS:

Active Choice:

As the name suggests, the active mode allows investors to select their investment amount in each asset class. However, only those with knowledge of the stock market should choose this mode. After the investor decides on the relevant options, including the Pension Fund Manager, the PFM will take up from there in managing the fund.

Also Read: Bank Of Maharashtra Among 4 Banks Revised FD Rates, Senior Citizens Can Get Up To 9.25%

The assets are classified into four categories: Class E is for equity and equity-related instruments, Class C is for corporate debt and related instruments, Class G is for government bonds and related instruments, and Class A is for alternative investment funds like ReITs and InvITs, etc. However, investors have some limitations in asset allocation based on age. For example, a 50-year-old investor can only allocate up to 75 per cent in equities. As their age increases, the equity allocation will also decrease.

Auto Choice:

In this mode, the PFM takes full charge of the pension fund. However, the investor must select one or more schemes available under this mode, suitable for individuals with little market knowledge. So, depending on their risk appetite, they can choose from the options: Aggressive, Moderate, and Conservative Life Cycle Funds.

In the aggressive scheme, allocation of up to 75 per cent in equity is allowed, provided the investor is 35 years old; after that, the allocation will accordingly decrease with age.

Also Read: How Does A SWP Plan Work? How It Fulfills Cash Needs For Senior Citizens

In the moderate life cycle fund, allocation of up to 50 per cent in equity is allowed until age 35, and it will reduce further as age progresses. In the conservative fund, only a 25 per cent allocation in equity is permitted till age 35; after that, it gradually decreases.

In conclusion, the NPS investor has many options depending on their risk profile and income. So, choose wisely to make the most from NPS.

Also Read: 7 Fine Wine Trails Around The World You Must Explore