If you are someone who wants an active say in asset allocation—to decide how much to put in equity and debt funds—the National Pension System (NPS) may not excite you because investors today can’t invest more than 50% in equity through active choice. That’s about to change to an extent as the Pension Fund Regulatory and Development Authority (PFRDA) has released a concept note for public comments on allowing investors to increase their equity allocation to 75%. Not a 100% yet, but better than 50%. The note is up for comments and you can read it here.
While this change would impact mostly those who choose ‘active choice’ investing, it is also proposed that at age 50 the equity investments will begin to taper so that by 60 (when the investment matures), equity is not more than 50%. Higher allocation to equity is good for long-term investors but will it make NPS the go-to retirement product? Not yet, because you will need to commit 40% of the maturity corpus to a pension product. Let’s see how this will impact you.
