NPS Subscribes Can Now Change Asset Allocation Four Times A Year

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National Pension Scheme (NPS) can now adjust their asset allocation up to four times each year. During a press conference on June 14, 2022, PFRDA chairperson Supratim Bandyopadhyay claimed that this was done in response to pleas from numerous NPS customers who desired more adjustments in a year. If they have chosen active choice asset allocation, NPS users are currently able to modify their investment pattern twice every fiscal year. If they have chosen active choice asset allocation, NPS users are now able to modify their investment pattern twice every financial year.

Individuals can contribute a monthly sum to the National Pension System (NPS) in order to receive regular income after retirement. It is a government-sponsored pension plan for government employees that began in January 2004. It was later opened to all sections in 2009. The NPS is a government-sponsored pension-cumulative-investment system designed to give people of India with long-term financial stability. It provides a compelling long-term saving option for properly planning your retirement through secure and regulated market returns.

Investors in the National Pension Scheme, or NPS, have the option of changing their scheme selection online or offline. By logging into his or her NPS account and selecting the Scheme Selection Alter option, the subscriber can change his or her scheme preference online. The NPS app has this feature as well.

A subscriber can also send a physical request (Form GOS-S3) to the Nodal Office with which he or she is linked. The GOS-S3 form is available on the CRA website for free download. The Nodal Office will update the Scheme Preference in the CRA system once the physical request has been received.

How the NPS Scheme Change Works

Scheme preference change for NPS is processed in T+4 day. T being the date of authorisation. Redemption (withdrawal of units) of the existing scheme happens on T+1. 

Latest available NAV will be considered for units redemption.  On T+4, units as per the revised ‘scheme preference’ will be credited in the subscriber’s account

If scheme preference change is executed after the end of previous business day and before the beginning of next business day then the T day is considered for redemption and the request will be settled in T+3 working days

Meanwhile, the total number of subscribers for National Pension Scheme (NPS) and Atal Pension Yojana (APY) stood at 5.33 crore as of June 4, PFRDA Chairperson Supratim Bandyopadhyay recently said.

As of June 4, 2022, the Asset Under Management (AUM) under NPS and APY was at ₹7,39,393 crore.

The number of subscribers in the category of central government employees of NPS was 22.98 lakh and AUM at ₹21,876 crore. Total subscribers in state government employee category of NPS was 56.46 lakh and AUM at ₹3,69,837 crore in the period.

More Pension Fund Managers are needed

Subscribers to the NPS must pick between seven different pension fund managers to manage their money. To give more options, the PFRDA intends to add more fund managers. Axis Pension Fund, Max Life, and Tata have all been granted in-principle permission to administer pension funds, increasing the total number of pension fund managers to 10.

Tier 1 and Tier 2 Under NPS

There are two types of NPS accounts — Tier 1 and Tier 2. Tier 1 account is mainly meant for retirement savings where one has to make a minimum contribution of Rs 500 while opening the account. It also entails tax benefits under Section 80CCD (1B) of the Income Tax Act, 1961.

Under the NPS Tier 1, a person is allowed to withdraw 60 per cent of the accumulated corpus contributed during his/ her working years at the time of retirement, which is tax-free. The remaining 40 per cent is converted into an annuatised product.

NPS Tier 2 is an open-access account with a minimum investment of Rs 1,000, where the subscriber is free to withdraw his/ her entire corpus at any point in time. No tax benefits are available in this account.

NPS has a Risk Factor

Subscribers to NPS will soon be able to view the risk profile of any NPS programme managed by a pension fund manager. Mutual fund firms have previously adopted this strategy. This risk-o-meter shows them how much risk the scheme’s portfolio can withstand. Subscribers would benefit from an analogous statistic in NPS to help them make better selections.

The Risk Rating System

The Pension Fund Regulatory and Development Authority of India (PFRDA) rules have outlined six levels of risk Low Risk, Low to Moderate Risk, Moderate Risk, Moderately High Risk, High Risk, and Very High Risk.

Schemes of the National Pension System (NPS) are becoming an important asset for investment for long-term saving of the individuals and help in creating a desired corpus for pension, if invested in an informed manner. The investment under various asset classes of the Schemes of Pension Funds would involve different level of risks for subscribers and, therefore, it is desired that the adequate disclosure of the risks involved in various schemes of NPS are made available for awareness of the subscribers, the PFRDA has said in the circular.

NPS Subscribers can Change Investment Choice 4 Times a Year

According to reports, the four-change facility for NPS customers has already gone online and will be accessible from the current fiscal year.

The new PFRDA action has no impact on NPS members who have chosen automatic asset allocation, as their investments are rebalanced based on their age and asset preferences.

The PFRDA has taken many steps to make the NPS a more feature-rich retirement option. Subscribers to the National Pension System (NPS) can choose from four asset classes: stock, government securities, corporate bonds, and alternative assets.

The total assets under management under the NPS and Atal Pension Yojana was at 7.39 lakh crore as on June 4, 2022, with 533.64 lakh members.

NPS accounts for nearly a quarter of the projected 35 lakh crore in pension funds. Subscribers to the National Pension System (NPS) must now pick one of the seven pension fund managers from which to invest. PFRDA, on the other hand, intends to provide investors greater options in the future. 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.