PFRDA Plans to Launch Balanced Life-Cycle Fund

On 21st June, 2024, Pension Fund Regulatory and Development Authority (PFRDA) Chairman Deepak Mohanty said that India’s pension fund regulator plans to launch a balanced life-cycle fund for people 

“The fund will be an additional option in the auto choice where equity allocation can be maximum up to 50%, but the tapering would start only after 45 years of age. This will help subscribers accumulate more corpus in their individual retirement fund,” PFRDA Chairman said on the sidelines of the pension regulator’s Annual Felicitation Program for Atal Pension Yojana (APY) held in New Delhi.

Asset-allocation funds known as “life-cycle funds” automatically reduce risk as the target retirement date draws nearer by adjusting each asset class’s share.

Choices offered by NPS at Present

The National Pension System (NPS), at present, offers two choices to its subscribers, namely active choice and auto choice, for creating the pension portfolio. 

Under the active choice option, customers are free to choose the amount of funds they want to allocate to government securities, corporate bonds and equity. 

However, there are three options available in case the subscribers opt for the auto choice: a conservative fund with a 25% equity allocation, a moderate fund with a 50% equity allocation, and an aggressive fund with a 75% equity allocation. After a subscriber turns 35, the equity allocation in all options starts tapering off. Having said that, auto choice effectively caps contributions to the equity fund at 20% at age 50 and reduces them to 15% by the age of 55 years.

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According to PFRDA’s Chairman Mr. Mohanty, in 2023-24, the pension fund regulator added 947,000 new subscribers to the NPS from the non-government sectors. This resulted in a boost in the NPS’ assets under management (AUM) by 30.5% year on year to Rs. 11.73 trillion. As of 31st May, 2024, the total NPS subscriber base is 180 million. In 2024-25, PFRDA plans to add 1.1 million non-government subscribers. As of 20th June, 2024, under the Atal Pension Yojana, the total gross enrolments exceeded 66.2 million. PFRDA Chairman Mohanty called it the highest ever in a fiscal year since the inception of APY scheme.