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A National Pension System (NPS) subscriber can now change asset allocation four times in a financial year. This will enable savvy subscribers — who had opted for active choice asset allocation — to take advantage of market movements.
Four changes each will be allowed for both Tier-I and Tier II accounts. Prior to this change, the Pension Fund Regulatory and Development Authority (PFRDA) had allowed subscribers, who had opted for active asset allocation, to change their asset allocation only two times in a year.
PFRDA Chairman Supratim Bandyopadhyay said the four changes have been allowed in response to requests from subscribers for allowing more changes in a year. He, however, cautioned that subscribers would do well to always remember that NPS, as a product, is aimed for the long term and the flexibility of four changes should be used in a prudent manner.
“Four changes facility for NPS subscribers has already gone live and would be available from current financial year itself,” said sources.
The latest PFRDA move does not affect those NPS subscribers who have opted for auto choice of asset allocation, as their investments get rebalanced, depending on their age and choice between assets.
The PFRDA has been taking several initiatives to make NPS a feature-rich retirement solution. Under NPS, subscribers can decide their allocation among four asset classes – equity, government securities , corporate bonds and alternative assets.
As of June 4, 2022, the aggregate assets under management under NPS and Atal Pension Yojana stood at ₹ 7.39-lakh crore with 533.64 lakh subscribers.
Of the estimated ₹35-lakh crore worth of pension assets, NPS accounts for about 21 per cent.
The other initiatives of PFRDA that are under implementation include allowing 75 per cent equity exposure for non-government sector without any tapering after 50 years of age. PFRDA also plans to allow 100 per cent investments in Equity under Tier-II accounts.
As of now, NPS subscribers have to choose one pension fund manager for their investments from the available seven pension fund managers. However, going forward, PFRDA plans to enable investors to have more choices. Three new pension fund managers — Axis Pension Fund, Max Life and Tata — have received in-principle approval for becoming a pension fund manager, making a total of 10 pension fund managers to choose from for subscribers.
Also, till date, all asset classes were managed by a single fund manager, but going forward, non-government subscribers will get to appoint a separate fund manager for each asset class they invest into. This facility will, however, not be a mandatory one, according to PFRDA.
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