Planning for retirement early in your career helps ensure financial security and peace of mind in your later years. The National Pension Scheme is one of the most popular and effective retirement fund investment choices.
This government-sponsored pension scheme offers a structured way to accumulate retirement funds through regular contributions. This guide will help you navigate the process of selecting the best NPS investment option to ensure you can maximise your future benefits.
The National Pension Scheme (NPS) is a government-supported retirement savings program designed to offer a stable income post-retirement. It is open to all Indian citizens aged 18 to 70 and allows for voluntary contributions to a pension account throughout one’s working life.
Contributions to Tier I under this scheme are eligible for tax benefits under Section 80C and 80CCD, while Tier II accounts offer easier access to funds.
Also Read to Know More About the Retirement Plans
Consider these two factors when making an investment choice in NPS
Assessing your risk tolerance is essential when making your investment choice in NPS. The assets that you choose and the investment strategy you apply need to align with your risk appetite.
If you are a younger subscriber, you have more time before retirement and have a higher chance of benefiting from exposure to equities.
On the other hand, if you happen to be closer to retirement, safer investments may be a better option.
The potential returns from different asset classes can vary significantly. Equities tend to have higher returns compared to government and corporate bonds. This is due to their growth potential and ability to outpace inflation over the long term.
On the other hand, Government bonds are more stable and give predictable returns but offer lower yields.
When selecting your investment mix, it is crucial to consider your retirement timeline and risk tolerance.
NPS has multiple Pension Fund Managers (PFMs), two investment options (Auto or Active), and four asset classes, namely, Government Bonds, Alternative Investment Funds, Corporate Debt and Equity. The subscriber first chooses a PFM and then has the option to select one of the investment options.
Active Choice Investment Option Under NPS saving schemes:
Active Choice in NPS investment offers more flexibility and control over investment options. Under this choice, there are four primary investment options, also known as asset classes. Here is a breakdown of each asset class and the ideal investors for them:
| Sr. No. | Asset Class | Ideal Investor | Investment type |
|---|---|---|---|
| 1. | Asset class E | Those with a higher risk appetite and a long investment horizon. | Equity and related instruments |
| 2. | Asset class C | Those looking for a balance between safety and growth. | Corporate debt and related instruments |
| 3. | Asset class G | Conservative investors looking for secure investment options. | Government Bonds and related instruments |
| 4. | Asset Class A | Investors seeking diversification and a higher risk appetite. | Alternative Investment Funds including instruments like CMBS, MBS, REITS, AIFs, Invlts etc. |
Auto Choice NPS saving schemes:
Auto Choice in NPS investment offers a convenient approach to the investment. It automatically adjusts the allocation of funds among different asset classes based on the subscriber’s age. This helps reduce the risk exposure over time. Here are the different types
| Sr. No. | Life Cycle Fund | Ideal Investor | Investment type |
|---|---|---|---|
| 1. | LC75 - Aggressive | Subscribers with high-risk appetite wanting higher returns | Starts with a high equity exposure and gradually decreases. |
| 2. | LC50 - Moderate |
Subscribers with a balanced approach between risk and returns | Starts with a moderate equity exposure and gradually decreases. |
| 3. | LC25- Conservative | Subscribers with a conservative risk approach | Starts with a conservative equity exposure and gradually decreases. |
Also Know More About the Stages of Retirement Planning
Choosing the right NPS option involves matching your risk tolerance and investment horizon with the available asset classes and fund types. Ensuring all these factors align with your retirement goals ensures a stable and rewarding financial future.
Along with fantastic investment options, PNB MetLife offers free tools and calculators for comparing different aspects of your investment. This helps you make informed financial decisions.
For a subscriber aged 45 in the Conservative Life Cycle Fund, the maximum equity allocation is 15%.
At age 50, the equity exposure in the Aggressive Life Cycle fund is 20%.
Piyush Kataria, SEO Manager at PNB MetLife, is a seasoned digital marketing strategist with over a decade of experience in optimizing websites for search engines. His expertise extends to keyword research, content strategy, technical SEO, and link building, all of which have been instrumental in driving organic traffic growth at PNB MetLife. With a strong foundation in life insurance, Piyush leverages his industry knowledge to create targeted and effective SEO campaigns.
Sakshi Malhotra is a seasoned marketing professional associated with the Life Insurance industry since 2007. At PNB MetLife, she heads Digital Marketing and Direct to Customer line of business. She is responsible for driving effective customer engagement through the company’s website and social media channels. In addition, she drives customer online buying journeys to help them buy the right product.
The aforesaid article presents the view of an independent writer who is an expert on financial and insurance matters. PNB MetLife India Insurance Co. Ltd. doesn’t influence or support views of the writer of the article in any way. The article is informative in nature and PNB MetLife and/ or the writer of the article shall not be responsible for any direct/ indirect loss or liability or medical complications incurred by the reader for taking any decisions based on the contents and information given in article. Please consult your financial advisor/ insurance advisor/ health advisor before making any decision.
PNB MetLife India Insurance Company Limited
Registered office address: Unit No. 701, 702 & 703, 7th Floor, West Wing, Raheja Towers, 26/27 M G Road, Bangalore -560001, Karnataka
IRDAI Registration number 117 | CIN U66010KA2001PLC028883
For more details on risk factors, please read the sales brochure and the terms and conditions of the policy, carefully before concluding the sale.
Tax benefits are as per the Income Tax Act, 1961, & are subject to amendments made thereto from time to time. Please consult your tax consultant for more details.
Goods and Services Tax (GST) shall be levied as per prevailing tax laws which are subject to change from time to time.
The marks "PNB" and "MetLife" are registered trademarks of Punjab National Bank and Metropolitan Life Insurance Company, respectively. PNB MetLife India Insurance Company Limited is a licensed user of these marks.
Call us Toll-free at 1-800-425-6969, Phone: 080-66006969, Website: www.pnbmetlife.com, Email: indiaservice@pnbmetlife.co.in or Write to us: 1st Floor, Techniplex -1, Techniplex Complex, Off Veer Savarkar Flyover, Goregaon (West), Mumbai – 400062, Maharashtra. Phone: +91-22-41790000, Fax: +91-22-41790203.
| Beware of Spurious Phone Calls and Fictitious / Fraudulent Offers! IRDAI or its officials is not involved in activities like selling insurance policies, announcing bonus or investments of premium. Public receiving such phone calls are requested to lodge a police complaint. |
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