Key points
- Investment options for central government NPS and UPS subscribers increased from 4 to 6, giving more flexibility by risk appetite.
- Two new auto-choice life-cycle options have been added for those comfortable with higher equity exposure for long-term growth.
- Default scheme still exists, but employees can now actively move to five non-default options and select any one of the authorised pension fund managers.
- New choices are already live on the Central Recordkeeping Agency (CRA) platform, so government employees can switch immediately through their online NPS account.
- PFRDA continues to advise subscribers to periodically review returns and asset mix instead of remaining passive in the default scheme.
Until now, most central government employees were invested in a default scheme where contributions were spread across three pension funds according to a fixed asset allocation pattern, with only around 4% opting for any alternative. After the new framework, employees still have a default option, but can also choose from five additional models that offer different mixes of government securities, debt, and equity aligned to age and risk tolerance.
The change is targeted mainly at younger and mid-career staff who want to benefit more from equity markets for retirement planning, instead of being locked into a conservative pattern throughout their service. It also aligns government subscribers more closely with the flexibility already available to many private-sector NPS users, where active and life-cycle choices are widely used.
The six options are now available
Government employees covered under NPS and UPS now have the following six broad choices for their retirement corpus:
- Default scheme, contributions are invested as per a pre-set formula managed by three pension funds.
- Active Choice, 100% in Government Securities (G-Secs), meant for those seeking maximum safety with negligible equity exposure.
- Auto Choice, Life Cycle 25 (low risk), equity around 25% till age 35, gradually falling to about 5% by age 55.
- Auto Choice, Life Cycle 50 (moderate risk), equity around 50% till age 35, tapering to about 10% by age 55.
- Auto Choice, Life Cycle 75 (high risk), equity exposure up to 75% till age 35, steadily reducing to around 15% by age 55, aimed at young, aggressive investors.
- Auto Choice, Life Cycle Aggressive, keeps about 50% equity till age 45 and around 35% equity till age 55, balancing growth and risk for longer.
The key idea behind all life-cycle models is that equity allocation is higher when the subscriber is young and gradually reduces as retirement nears, automatically de-risking the portfolio over time.
What employees need to do now
Those who stay in the default scheme need not take any action, but they will also continue with the same conservative pattern that may not fully capture long-term market growth potential. Employees who want more tailored portfolios must log in to their NPS account, opt out of the default scheme, pick one of the five non-default options, and then select one of PFRDA’s registered pension fund managers to run their money.
PFRDA has already enabled the new options on the CRA platform, and updated return data for each scheme and fund manager is available on the NPS Trust website, helping subscribers compare performance before deciding. The regulator has also advised central government employees to periodically review their chosen option and make changes when their age, financial goals, or risk appetite shift, rather than treating NPS as a “set and forget” product.
