Subscribers can now change asset allocation four times a year


The National Pension Scheme (NPS) will now allow investors to change the asset allocation allowed under the scheme to four times a year, the Pension Funds Regulation and Development Authority (PFRDA) has announced.

PFRDA Chairman Supratim Bandyopadhyay told a conference on June 14 that this was allowed in response to calls from many NPS customers who wanted more adjustments within a year. This decision should make the process more convenient for subscribers.

Prior to this announcement, subscribers could only change the allocation twice a year. That said, the pension fund manager (PFM) can only be changed once per fiscal year.

Bandopadhyay further mentioned that although they have given people the option to change their asset allocation four times a year, subscribers need to be patient with their investment methodology.

“We allowed it to be changed four times in a year, but use it with a bit of caution, in the sense that if people are used to changing the investment choice so quickly, in fact they don’t not allow the earlier investment model to set up and give that kind of return. If one gets too impatient with a product that is normally longer term, it won’t help. You will have to be patient with your investment,” Bandopadhyay said.

NPS subscribers can spread their investments across a combination of instruments, such as government securities, debt securities, asset-backed and tax-structured investments, short-term debt investments, equities and related investments.

The total number of NPS and Atal Pension Yojana (APS) subscribers stood at 5.33 crores as of June 4, according to Bandopadhyay. As of June 4, 2022, Assets Under Management (AUM) under NPS and APY was Rs 7,39,393 crore.

What is NPS?

The NPS is a pension scheme that the Indian government has launched to provide the unorganized sector and working professionals with a pension after retirement. Investments of up to Rs 1.5 lakh can be used to avail tax deductions under Section 80C. An additional deduction of Rs 50,000 is available for NPS contribution beyond the Section 80C limit of Rs 1.5 lakh.

Eligibility: Any Indian citizen between the ages of 18 and 60 can open an NPS account.

Liquidity: NPS allows partial withdrawal after 10 years, but under special circumstances.

Rate of return: Yields are around 12-14% per year.

Investment limit: There is no limit to the maximum authorized contribution.

Tax treatment: Employer contributions are exempt from tax, subject to 10 percent of base salary and dearness allowance (14 percent in the case of central/state government employees).


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