In active option, the customer indicates in which asset his money is to be invested.
You can invest in NPS if you are an Indian citizen between the age of 18 to 70 years.
National Pension System (NPS) provides you financial security after retirement so that you can meet your needs and you do not have to go to anyone even if you are not employed. NPS was started in January 2004 for government employees but was opened to all in 2009. NPS is very useful in building a large corpus over the long term and arranging a pension after retirement, which is why investment in NPS is on the rise.
The National Pension System provides people with the option of investing in corporate bonds, government securities or equities. You can invest in NPS if you are an Indian citizen between the age of 18 to 70 years. Under this plan, you can make regular contributions during your working age. Thereafter, at the age of 60 years, you can withdraw a part of the accumulated wealth and get regular pension income from the remaining amount.
NPS offers two options to the subscriber to invest in the scheme, Auto and Active. Auto choice is an option in which the subscriber gives the freedom to the fund manager to invest his money wherever he wants, while in active choice the subscriber tells the assets in which to invest his money.
What is Active Option in NPS?
This option is available to NPS members who wish to choose their own combination. Subscribers can choose the proportion in which their money will be spread across various asset classes under this option. In other words, you have a say in the assets you own. Even within this option there are restrictions as the maximum number of shares that can be allotted is 75%. This maximum was raised from 50% a few years back.
What is Auto Choice in NPS?
There are three funds for auto allocation in NPS (NPS Auto Choice Option). One is the Default Moderate Life Cycle Fund. The maximum equity investment in this can be up to 50 per cent. The other is the conservative Life Cycle Fund, which allows only up to 25% investment in equities. The third one is Aggressive Life Cycle Fund in which you can invest up to 75% in equity.
3 things to keep in mind for Active Choice
If you want to choose the active option, consider three things before doing so. First, are they able to evaluate different asset classes and make the right capital allocation? Secondly, if the subscriber’s investments are elsewhere and NPS is a part of his overall portfolio, can he go for the active option? Third, if there is a need to make changes in the NPS portfolio in future, you will do so. If you consider yourself right on these three conditions, then you should opt for Active Choice for investing in NPS.
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