Scheme preferences for Government Employees in NPS

Scheme Preference in Tier I:

As per the present guidelines of Pension Fund Regulatory and Development Authority(PFRDA), Scheme Preference is the Pension fund schemes option chosen by the subscriber for investing the pension contribution amount. As far as NPS subscribers who are working in Central/State Government are concerned, there is only one default scheme for Tier I.  The scheme preference differs between NPS for Government Employees and  NPS for other citizens as far  as Tier I NPS is concerned.  While other citizens are allowed to invest in all of the pension funds available in NPS, Government Employees are allowed to invest only in three Pension funds (LIC, SBI and UTI)

Default Scheme for Government Employees (applicable only for Tier I):

In the default scheme, the contribution is allocated to three PFMs, viz. SBI Pension Funds Private Limited, UTI Retirement Solutions Limited and LIC Pension Fund Limited in a predefined proportion and each of the PFMs will invest the funds in the proportion of 85% in fixed income instruments and 15% in equity and equity related instruments.

Scheme preference for Government Employees in Tier II:

For Tier II, the government subscriber has been given the flexibility to choose one out of six Pension Fund Managers(PFMs) and also the percentage in which the selected PFM will invest the funds.

The six PFMs are

  • ICICI Prudential Pension Funds Management Company Limited
  • IDFC Pension Fund Management Company Limited
  • Kotak Mahindra Pension Fund Limited
  • Reliance Capital Pension Fund Limited
  • SBI Pension Funds Private Limited
  • UTI Retirement Solutions Limited

What are Asset Classes?

Investment in New Pension Scheme by Government Employees in Tier II can be made based on his expected return at the cost of taking calculated risk. There are three asset classes which are known as Equity (E), Corporate bonds (C) and Government Securities (G).

Equity (E):

This asset Class meant for the investment in company shares which are listed in National Stock Exchange. Once the choice made by you for portion of your investment in this assest class, it will be invested only in companies, stock prices which are accounted for calculating the Index (NSE Index). In other words, the fund managers are allowed to invest only in flagship companies in order to safeguard the investments of the NPS susbscribers.

Corporate Bonds (B):

This asset class is the investments made in Bonds issued by Big Corporates such as LIC, IDFC, IFCI etc. The idea behind the investment in these bonds is to earn steady income in the form of interest or dividend. The investment made in this asset class is safer compared to Equity.

Government Securities (G):

This assest class consists of investments only in securities issued by Government by time to time. Of course we have to forego part of our expected additional return for the sake of safety of investment

What is Active Choice?

When a subscriber chooses Active Choice, he can specify the percentage in which his / her money is to be invested in the three asset classes detailed above. However, allocation in Equity cannot be more than 50%.

Wnat is Auto Choice?

A subscriber opts for Auto Choice, system will automatically calculate the asset allocation percentages based on the subscriber's age.

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