Central Autonomous Body employees get 2 more NPS fund option: Details | Personal Finance

What has changed?

Until now, these additional investment choices were available only to central government employees enrolled under the NPS. Following the latest decision, eligible employees of Central Autonomous Bodies can also opt for them.

According to the government, the objective is to give subscribers “greater flexibility” in managing their retirement savings while enabling them to align investments with their financial goals and risk profile.

The two new investment options explained

The newly extended options are available under NPS Auto Choice, where the pension corpus is invested automatically based on a subscriber’s age.

1. LC-75-High (Earlier Aggressive Life Cycle Fund)

The first option, now renamed LC-75-High, permits an equity allocation of up to 75 per cent.

According to the Finance Ministry, it is “an investment option with equity exposure of up to 75 per cent, designed for subscribers seeking higher growth potential over the long term.”

Equities generally deliver better long-term returns but may experience higher market volatility. LC-75-High is likely to appeal to younger employees with a longer investment horizon and a higher tolerance for risk.

2. Aggressive Life Cycle Fund (Earlier Balanced Life Cycle Fund)

The second option has undergone a name change. The earlier Balanced Life Cycle Fund (BLC) has now been renamed the Aggressive Life Cycle Fund.

Under this option, equity exposure is capped at 50 per cent. The allocation to equities starts reducing gradually once the subscriber reaches 45 years of age, helping shift the portfolio towards relatively stable asset classes as retirement approaches.

Why has the government extended these options?

The extension is intended to put Central Autonomous Body employees on par with central government employees by giving them access to a wider range of retirement investment strategies.

In its release, the Finance Ministry said the move aims to “provide greater flexibility for NPS subscribers in Central Autonomous Bodies, enabling them to align their pension investments with their individual risk appetite, financial goals, and retirement planning requirements.” It added that the additional choices would “strengthen subscriber choice and enhance the attractiveness of the National Pension System.”

Administrative ministries and departments have also been instructed to inform Central Autonomous Bodies under their control about the new investment choices. The options will be made available through the Central Recordkeeping Agency (CRA) system.

What is Auto Choice in NPS?

NPS subscribers can invest through either Active Choice or Auto Choice.

Under Active Choice, subscribers decide how much of their pension corpus should be invested across different asset classes, subject to regulatory limits.

Under Auto Choice, the allocation is managed automatically through a life-cycle strategy. The mix of equity, government securities and corporate debt changes as the subscriber ages, gradually reducing exposure to equities closer to retirement.

The newly extended options are part of this Auto Choice framework.

Which Auto Choice options are now available?

With the latest change, eligible subscribers can choose from multiple life-cycle strategies based on their preferred level of risk, including:

Life Cycle 25 (Low Risk)

Life Cycle 50 (Moderate Risk)

LC-75-High, which allows equity exposure of up to 75 per cent

Aggressive Life Cycle Fund, with equity exposure capped at 50 per cent and gradual de-risking from age 45

What does it mean for employees?

The latest decision does not alter NPS contribution rates or withdrawal rules. Instead, it expands the range of investment choices available to eligible Central Autonomous Body employees.

Subscribers who are comfortable with greater market-linked volatility may consider the higher-equity LC-75-High option for potentially better long-term returns. Those seeking a relatively balanced approach can opt for the Aggressive Life Cycle Fund, where equity exposure is lower and automatically reduces with age.

For employees planning retirement over the long term, the wider choice allows them to better align their pension investments with their financial objectives without moving away from the NPS framework.