Balanced Life Cycle Fund under NPS: PFRDA has launched a new investment fund called the Balanced Life Cycle Fund for NPS subscribers

New NPS investment option: Opportunity to earn higher returns from equity for these investors The new fund allows NPS subscribers to remain invested in equity for 45 years instead of the 35 years allowed in current life cycle funds. This will help equity investors earn higher equity returns

The Pension Fund Regulatory and Development Authority (PFRDA) has recently added a new fund to the National Pension System (NPS) called the 'Balanced Life Cycle Fund.' This new fund is open to private sector subscribers who have invested in NPS either through their employer's corporate model or by directly investing as individuals in the citizens' model.

PFRDA made the announcement about the new lifecycle fund through a circular dated October 1, 2024.

Balanced Life Cycle Fund: Key details

The new life cycle fund will automatically rebalance the asset classes, i.e., equity (E), government securities (G), and corporate bonds (C), depending on the age and risk profile of the NPS subscriber.

Retirement planning in NPS: You can lose Rs 21 lakh in total monthly income if you buy an annuity plan worth Rs 50 lakh without comparison

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Balanced Life Cycle Fund (BLC)

Age	Asset Class - E	Asset Class -C	Asset Class - G
Upto 45 years	50%	30%	20%
46 years	48%	28%	24%
47 years	46%	26%	28%
48 years	44%	24%	32%
49 years	42%	22%	36%
50 years	40%	20%	40%
51 years	39%	18%	43%
52 years	38%	16%	46%
53 years	37%	14%	49%
54 years	36%	12%	52%
55 years and beyond	35%	10%	55%

Source: PFRDA circular

Current investment options under NPS

Currently, the NPS scheme allows an investor to choose between Active or Auto Choice.

Active choice under NPS

The Active Choice fund allows the NPS investor to invest the contribution amount per his/her preference. The active choice allows an NPS investor to have a maximum equity allocation of 75% till the age of 50 years. After that, equity allocation is reduced to 50% at the age of 60 years. The balance 25% can be invested in government securities, corporate bonds and alternative investment funds. However, contribution to alternative investment funds cannot exceed 5% of the contribution amount.

Auto choice under NPS

The auto choice option is also known as the Lifecycle fund. Under this fund, there are three investment options available to the NPS investors, namely - a) LC75 - Aggressive Life Cycle Fund, b) LC50 - Moderate Life Cycle Fund and c) LC25 - Conservative Life Cycle Fund.

Equity allocation under Auto choice in NPS

All three investment options enable a high equity allocation until the age of 35, after which it gradually decreases. For instance, LC75 allows a maximum equity allocation of 75% until age 35 and starts reducing every year the NPS subscriber reaches the age of 55. Similarly, LC-50 allows a maximum equity allocation of 50% until age 35 and starts reducing every year the NPS subscriber reaches the age of 55.

According to the PFRDA circular, “The maximum equity allocation under Balanced Life Cycle Fund shall be 50% which shall taper down after the age of 45 years as compared to 35 years under existing life cycle funds.”
The PFRDA circular has clarified that the existing choices under NPS, namely, Active and Auto choices, will remain unchanged. The Balanced Lifecycle Fund will be an additional investment option. The existing Moderate Life Cycle Fund (LC50) will continue to be the default choice, stated PFRDA.

This story originally appeared on: India Times - Author:Faqs of Insurances