New NPS Norms: Subscribes Can Now Change Asset Allocation Four Times A Year

The National Pension Scheme (NPS) will now allow investors to change the asset allocation allowed under the scheme to four times in a year, the Pension Fund Regulatory and Development Authority (PFRDA) has announced.

PFRDA chairperson Supratim Bandyopadhyay said at a conference on June 14 that this was authorised in response to pleas from numerous NPS customers who desired more adjustments in a year. The move is expected to make the process more convenient for the subscribers.
    
Prior to this announcement, subscribers could change the allocation only twice annually. That said, the pension fund manager (PFM) can be changed only once in a financial year. 

Bandopadhyay further mentioned that though they have given people the option to change their asset allocation four times in a year, subscribers should practice patience with their investment methodology. 

“We have allowed it to be changed four times in a year, but use it with a little bit of caution, in the sense that if people are in the habit of changing the investment choice so quickly, actually they don’t allow the earlier investment pattern to set in and give that kind of a return. If one becomes too impatient with a product which is normally for a longer term, then that will not help. You will have to be patient with your investment,” said Bandopadhyay. 

NPS subscribers can allocate their investments in a mix of instruments, such as government securities, debt instruments, asset-backed and tax-structured investments, short-term debt investments, and equities and related investments. 

The total number of subscribers of NPS and Atal Pension Yojana (APS) stood at 5.33 crore as of June 4, according to Bandopadhyay. As of June 4, 2022, the Asset Under Management (AUM) under NPS and APY was at Rs 7,39,393 crore.

What is NPS?

The NPS is a pension scheme that the Indian government initiated to allow the unorganised sector and working professionals to have a pension after retirement. Investments of up to Rs 1.5 lakh can be used to avail tax deductions under Section 80C. An additional deduction of Rs 50,000 is available for NPS contribution over and above Section 80C limit of Rs 1.5 lakh. 

Eligibility: Any Indian citizen between the age of 18 and 60 years can open an NPS account.

Liquidity: NPS allows for partial withdrawal after 10 years, but under special circumstances.

Rate of Returns: The returns are around 12– 14 per cent annually.

Investment Limit: There is no limit on the maximum contribution allowed.

Tax Treatment: The employer contributions are tax-free, subject to 10 per cent of the basic salary and dearness allowance (14 per cent in case of central/state government employees).