The Central Government has expanded investment flexibility for its employees by allowing up to 75% equity allocation under the National Pension System (NPS) and the Unified Pension Scheme (UPS). This move aligns government subscribers with their private-sector counterparts, who already enjoyed similar high-equity investment options.
More Investment Freedom
Until now, government employees could only choose life cycle funds with limited equity exposure—LC25 (25%) or LC50 (50%). With the introduction of LC75 and the Balanced Life Cycle (BLC) fund, they can now opt for higher equity exposure based on their risk appetite and retirement goals.
These funds follow a “glide path”—gradually reducing equity exposure and increasing allocations to debt and government securities as the investor ages. This ensures higher growth in early years and greater stability near retirement.
Key Investment Options
- LC75 (Aggressive Life Cycle Fund): Starts with 75% equity allocation at age 35, tapering to 15% by age 55.
- BLC (Balanced Life Cycle Fund): A variation of LC50 that retains higher equity exposure for a longer duration, reducing it only after age 45.
- Scheme G: Offers 100% investment in government securities, suited for risk-averse investors.
Simplified Fund Framework
The Pension Fund Regulatory and Development Authority (PFRDA) has also rationalised fund names to reflect their risk levels and investment profiles more clearly. This addresses earlier inconsistencies—where BLC occasionally showed higher equity exposure than LC75 at certain ages—by ensuring transparent and consistent categorisation.
Why the Change Matters
- Greater Flexibility: Employees can align pension portfolios with their financial goals.
- Parity with Private Sector: Brings government staff investment options at par with corporate subscribers.
- Balanced Risk Management: Automatic portfolio adjustment ensures a smoother transition to safer assets near retirement.
The reform is expected to make NPS and UPS more attractive to government employees, encouraging long-term wealth creation and disciplined retirement planning.
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