PFRDA New NPS Scheme 2024: Features, Benefits & Other Details

PFRDA New NPS Scheme

According to a statement made on June 21 by Deepak Mohanty, chairman of the Pension Fund Regulatory and Development Authority (PFRDA), a new NPS balance lifecycle programme that attempts to balance out risks and returns will be introduced in July or August. The new NPS balance lifecycle scheme will be offered by all pension funds. In the current financial year, PFRDA hopes to enlist 11 lakh additional private sector members in the National Pension System (NPS). Read below to check the detailed information related to the PFRDA New NPS Scheme.

PFRDA New NPS Scheme 2024

A new NPS balanced lifecycle scheme will be implemented in July and run through September. Each of the two investment types in the new plan will be 50% debt and 50% equity. It will strike a balance between age-related risk and return. After 45 years of age, the debt proportion will rise under the NPS balance lifecycle scheme. The current NPS customers will be able to switch to the new plan.

Link NPS Account with Aadhaar Card

PFRDA New NPS Scheme Objective

Effective risk and return management is the goal. A Moneycontrol report stated that the investor’s age will determine how their assets are allocated. If investors are above 45 years old, their percentage of debt investments will increase.

Which NPS investment options are available right now?

You have two investment options when you subscribe to the NPS:

 1) Auto choice

 2) Active choice

Your money is automatically divided between debt and equity under the auto choosing option, according to your age. The LC 75, or Aggressive Life Cycle Fund, LC50, or Moderate Life Cycle Fund, and LC25, or Conservative Life Cycle Fund, are the three categories of auto choice alternatives that are now available.

Approximately 75% of your money is invested in stocks under the LC 75, or Aggressive Life Cycle Fund, until you are 35. After that age is reached, your exposure to equity decreases and your exposure to debt increases with each birthday that passes. Your stock allocation will drop to fifteen percent by the time you are fifty-five. The default option in the auto select option is now LC50, or Moderate Life Cycle Fund. Up until age35, the proportion of your investments in debt and equity is equal. You will have just 10% equity at the age of 55; the remaining amount will be invested in debt.

The LC25, or Conservative Life Cycle Fund, steadily lowers equity exposure as one ages, with a starting point of 25% until age 35. Your equity exposure drops to just 5% when you turn 55. NPS subscribers can choose how much debt and how much equity they want to allocate under the active choice option.

What is the NPS Balanced Life Cycle Fund?

Long-term returns on investments are often higher for stocks than for debt. Thus, until the NPS subscriber turns 45, the PFRDA intends to launch a plan with increased equity involvement. Following that, the debt allocation will increase while the equity exposure would decrease. According to Mohanty, a different methodology will be used for the tapering of equity in the Balanced Life Cycle Fund, which will begin at age 45. In the long run, this would optimise risk and return while also helping to enhance pension value. 

NPS Withdrawal Rules

How will the Balanced Life Cycle Fund benefit NPS subscribers?

For NPS subscribers who struggle to determine when and how much to invest in each asset class, the auto pick option is a good option. The NPS member does not need to actively control the allocation in accordance with their risk appetite because their equity exposure is decreasing annually. The Balanced Life Cycle Fund now has an increased equity exposure up to age 45. Therefore, it will help a number of youthful NPS clients. Since equity returns frequently outpace those of debt investments, they will be able to amass a larger corpus. Furthermore, it has not yet been announced that the Balanced Life Cycle Fund’s equity allocation will decrease.

For whom is the Balanced Life Cycle Fund Available?

According to Mohanty, Balanced Life Cycle Fund is an option available to both new and current NPS subscribers. Whether it will be the default choice in NPS’s auto choosing feature is yet unknown.

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