PFRDA launches scheme with higher equity

The Pension Fund Regulatory and Development Authority (PFRDA) has introduced a new life cycle plan called Balanced Life Cycle Fund (BLC) under the National Pension System (NPS) in October, 2024. This plan will let people invest 50% of their savings in stocks until they turn 45. 

The goal is to help increase the retirement savings of both government and private workers. “This new life cycle fund focuses on growth assets, particularly equity investments, providing more flexibility and potential for higher returns for NPS subscribers,” said PFRDA.

The decrease in stock investments under the Balanced Life Cycle Fund (BLC) is similar to the current LC50 plan, where stock investments are capped at 50%. However, with this new plan, the decrease starts at age 45 instead of 35.

Government workers who are willing to take more risks can also use the BLC under the new Unified Pension Scheme (UPS) if they want higher returns but without the guaranteed pension, which is 50% of their average pay over the last 12 months of work. In the UPS, people who pick the default option would still get a guaranteed pension.

The money managed under the NPS is expected to grow by 28% each year, reaching Rs 15 trillion by the end of 2024-25. This growth will come from more private workers joining and the new life cycle plan.

The automatic life cycle fund will be a good choice for private workers who don’t know how to manage their NPS investments.

The new plan is an improvement over the current LC50 – Moderate Life Cycle Fund, which also allows up to 50% of the money to be invested in stocks. In the current plan, investments in stocks stay at 50% until the person turns 35, and then they slowly go down as the person gets older. This plan is available to government workers too.

Related News: PFRDA Plans to Launch Balanced Life-Cycle Fund

If the market stays the same, the total money in NPS, including the Atal Pension Yojana (APY), will probably reach Rs 15 trillion by March 31, 2025.

PFRDA hopes that 13 million new APY subscribers will join in FY25, along with 1.1 million private workers. It is working on increasing the number of private subscribers since the government sector subscribers are already saturated.