India’s pension fund regulator plans to launch a balanced life-cycle fund for people who want more equity allocation in their portfolio in the September quarter, said Deepak Mohanty, chairperson, Pension Fund Regulatory and Development Authority (PFRDA) on Friday, according to a Mint report.

Representational

“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,” Mohanty told Mint on the sidelines of the PFRDA’s Annual Felicitation Program for Atal Pension Yojana (APY) in New Delhi.

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Earlier, the allocation for equity funds decreases starting at age 35.

Life-cycle funds are asset-allocation funds in which the share of each asset class is automatically adjusted to lower risk as the desired retirement date approaches, according to the article.

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NPS choices

Currently, the National Pension System (NPS) offers two choices to subscribers for creating the pension portfolio: Active and auto.

In the active choice, subscribers can decide the allocation across equity, corporate bonds and government securities on their own.

The auto choice, however, comes with three options: Aggressive fund (75% equity allocation), moderate fund (50% equity allocation) and conservative fund (25% equity allocation).

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What is tapering all about?

The equity allocation starts tapering off in all options after a subscriber turns 35. Auto choice allows a maximum of 20% in the equity fund at 50 years of age, which further tapers down to 15% by the age of 55 years, according to the report.

The numbers

Mohanty said the PFRDA added 947,000 new subscribers from the non-government sectors to the NPS in 2023-24, boosting the NPS’ assets under management (AUM) by 30.5% year-on-year to 11.73 trillion. The total NPS subscriber base stands at 180 million as of 31 May 2024, the report read.

The total gross enrolments under the Atal Pension Yojana (APY) crossed 66.2 million as of June 20, 2024, of which more than 12.2 million were added in 2023-24. “It is the highest ever in a fiscal year since the scheme’s inception,” Mohanty said.

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