NPS subscribers can change investment choice 4 times a year

National Pension System (NPS) subscribers can now change their asset allocation four times during a financial year. PFRDA chairperson Supratim Bandyopadhyay, during a press conference held on June 14, 2022 stated that this has been allowed in response to requests from many NPS subscribers who wanted more changes in a year.

Currently, NPS subscribers are allowed to change the investment pattern twice in a financial year if they have opted for active choice asset allocation.

Investment choice can be changed 4 times in an FY

Soon, subscribers can tweak their asset allocation four times a year for each of their tier I and tier II accounts. Tier I is a required account with a longer lock-in period and associated tax benefits.

However, subscribers should keep in mind that NPS is a long-term product, and the flexibility of four changes should be handled with caution.

“Investment choice, we have allowed it to be changed any 4 times in a year (not just once in a quarter). Use it with a little bit of caution, in the sense that if people are in the habit of changing the investment choice so quickly, actually they don’t allow the earlier investment pattern to set in and give you that kind of a return, before that one changes it. If one becomes too impatient with a product which is normally for a longer term then maybe that will not help. You will have to be patient with your investment,” PFRDA Chairman Supratim Bandyopadhyay said.

NPS subscribers are allowed to allocate their investments in a mix of instruments such as government securities, debt instruments, asset-backed and trust-structured investments, short-term debt investments, and equities and related investments.

“People sometimes mix it up with some mutual fund kind of thing that can give good returns. You have to give it some time and thereafter, only you can use it (changing option). Use it judiciously, we are going to increase it to four times in a year (financial year),” the PFRDA chairman said during a webinar held in December 2021.

More pension fund managers

Subscribers to the NPS must choose one of the seven pension fund managers offered to handle their money. PFRDA plans to add more fund managers to provide more option. Three new pension fund managers — Axis Pension Fund, Max Life, and Tata — have gained in-principle authorisation to handle pension funds, bringing the total number of pension fund managers to ten.

Risk factor in NPS

Subscribers to NPS will soon be able to see the risk profile of any pension fund manager’s NPS scheme. The same has been already been followed by Mutual fund houses. This risk-o-meter informs them of the level of risk handled by the scheme’s portfolio. An equivalent metric in NPS would also assist subscribers in making better decisions.

Also read:
Now NPS schemes will indicate risk profile: Here’s how to check

The total number of subscribers for NPS and Atal Pension Yojana (APY) stood at 5.33 crore as of June 4, said Bandyopadhyay. As of June 4, 2022, the Asset Under Management (AUM) under NPS and APY was at Rs 7,39,393 crore.

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