While investors already had 10 pension fund managers to invest in the National Pension System (NPS), there is a new entrant in DSP Pensions that was granted a certificate of registration by the PFRDA.
With this, the scope of subscribers in terms of choosing the pension fund managers widens a bit more. After opting for a pension fund manager, subscribers are meant to choose one of the investment options (auto or active).
Besides, NPS portfolio includes four asset classes: equity, corporate debt, government bonds and alternative investment funds (AIFs).
At the outset, subscribers have to opt for one of the PFMs (currently 10 are available). For this, one is expected to learn about the historical returns delivered by these fund managers in the past one and three years.
| Pension Fund Managers | 1-year returns (%) | 3-year returns (%) |
| SBI | 11.94 | 20.33 |
| LIC | 11.72 | 22.06 |
| UTI | 11.63 | 21.27 |
| ICICI | 13.02 | 22.02 |
| Kotak | 13.41 | 21.59 |
| HDFC | 11.34 | 20.96 |
| Aditya Birla | 11.90 | 19.82 |
| Tata | 12.93 | --- |
(Source: NPS; returns on equity investment as on July 31, 2023)
Once a fund manager is opted for, subscriber has to zero in on the investment option: auto or active.
In the active option, subscribers can decide his own asset allocation between equity, bonds (corporate & government) and AIFs.
But one is not permitted to invest more than 75 percent in equity up to 50 years of age. From 51 years and above, the equity allocation will decline 2.5 percent each year.
Subscribers can also choose the auto choice investment option wherein there are three alternatives: aggressive, moderate and conservative.
In aggressive, exposure to equity starts with 75 percent till 35 years of age. The balance allocation is made to other asset classes such as corporate and government debt. With each passing year, the allocation to equity falls while that to debt instruments increases.
In the moderate auto choice, the equity exposure's cap is set at 50 percent of total assets till 35 years of age, and it declines 2 percent with each passing year, whereas in conservative choice, the exposure to equity is 25 percent of total assets till the age of 35.
To sum up, investing in an NPS is highly flexible and dynamic wherein one can choose the asset allocation either as per your discretion, or by putting on an auto pilot mode.
However, before opting for it, one can make sure to choose a pension fund manager out of the ten options available – soon to be expanded to 11.
