Under the National Pension System (NPS), investors can choose from different asset allocation options

NPS provides multiple asset allocation options which can cater to investors across all age groups and risk profiles

Asset Allocation for Your NPS Investments

Flexibility under NPS

The National Pension System (NPS) investment provides the flexibility to choose from multiple asset classes, including Equities, Corporate Debt, Government Bonds, and Alternative Investment Funds. Moreover, NPS investments empower you to determine the allocation percentage for each asset class, switch fund managers once a year, and switch investment schemes up to four times annually. Let's understand how to invest in NPS.


  • NPS enables systematic savings during the subscriber's working life

  • Asset allocation under NPS varies from aggressive to risk-averse

  • The goal of all asset allocation options is the remains same, mitigate risk toward retirement age

  •  Periodic review and rebalance of the asset allocation are essential

National Pension Scheme offers two main investment choices, each with a different mix of asset classes

  • Active Choice: Under this option of NPS, investors can actively decide the percentage allocation of their funds across multiple asset classes. Four asset classes are available for the distribution of funds:

  • Scheme E (equity) - It allows participation in equities up to 75% of the investment, primarily allocated to stocks.

  • Scheme C (corporate debt) - In this scheme, the entire investment is directed towards high-quality corporate bonds, up to 100% of the portfolio.

  • Scheme G (government/gilt bonds) - This scheme invests up to 100% of the total investment in government bonds.

  • Scheme A (alternative investment) - Newly introduced for private sector subscribers with active choice, this scheme permits an allocation of up to 5% of the investment in alternative assets like REIT (Real Estate Investment Trust)

Also Read: Best ETFs to Invest in India

  • Auto Choice: This option of the National Pension Scheme automatically adjusts the investment mix as the investor ages, aiming to optimise returns and manage risk according to the investor's retirement timeline.

  • The three variants of Auto Choice are:

  • Aggressive: In this variant, a higher proportion of investments is allocated to equities during the initial years when the investor is younger and has a longer investment horizon. Allocation to equities gradually decreases, and debt instruments increase.

  • Moderate: It starts with moderate allocation to equities, gradually decreasing over time, while the allocation to debt instruments increases slowly.

  • Conservative: It begins with a significant allocation to debt instruments and a smaller allocation to equities, with equity further decreasing with investor age.

7 Funds Managers investors can choose from

  • ICICI Prudential Pension Fund Management

  • HDFC Pension Management

  • Kotak Mahindra Pension Fund

  • LIC Pension Fund

  • SBI Pension Funds

  • UTI Retirement Solutions

  • Birla Sun Life Pension Management


Investors must assess their risk tolerance, investment horizon, and financial goals before selecting an appropriate asset allocation option under the National Pension Scheme.

Disclaimer: This article is intended for general information only and should not be construed as investment, tax, or legal advice. You should separately obtain independent advice when making decisions in these areas.

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Also Read: Ulips or Mutual Funds, Where to Invest?


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