NPS, UPS get 75% equity option for govt staff: Here's what it means

Govt staff can now take up to 75% equity under NPS, UPS, aligning their investment options with private-sector subscribers

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The central government has allowed its employees to take greater control of their retirement savings by extending the Life Cycle 75 (LC75) and Balanced Life Cycle (BLC) investment options under both the National Pension System (NPS) and the Unified Pension Scheme (UPS).

 

The extension brings central government employees on par with private-sector subscribers who already had access to these higher-equity investment options.

 

Greater flexibility in investment choice

Until now, government employees could opt for default life cycle funds such as LC25 or LC50, where equity allocation was capped at 25 per cent and 50 per cent, respectively. With the inclusion of LC75 and BLC, employees can now pick equity exposure up to 75 per cent in their NPS or UPS accounts -- depending on their risk appetite.

 

These funds automatically adjust the mix of equities (E), corporate debt (C), and government securities (G) as the subscriber ages, a process known as the glide path. This helps in balancing risk and returns while protecting accumulated savings closer to retirement.

 

LC75 (Aggressive Life Cycle Fund): Starts with 75 per cent equity exposure at age 35 and gradually reduces to 15 per cent by 55.

 

BLC (Balanced Life Cycle Fund): A modified version of LC50, where the tapering begins at age 45, letting subscribers remain invested in equities longer.

 

Scheme G: Offers 100 per cent investment in government securities for risk-averse investors. 

 

How the glide path works: Gradual shift with age

The PFRDA explained that under both LC75 and BLC, equity exposure declines with advancing age to limit volatility risks near retirement.

 

In its official release, the ministry of finance shared a detailed table of asset allocation patterns that illustrate how investment proportions in equity, corporate debt, and government securities evolve over time.

 

Asset Allocation in Life Cycle Funds

 

Age	LC75	LC50	Balanced LC50	LC25
Up to 35 years	E: 75%, C: 10%, G: 15%	E: 50%, C: 30%, G: 20%	E: 50%, C: 30%, G: 20%	E: 25%, C: 45%, G: 30%
40 years	E: 55%, C: 15%, G: 30%	E: 40%, C: 25%, G: 35%	E: 50%, C: 30%, G: 20%	E: 20%, C: 35%, G: 45%
45 years	E: 35%, C: 20%, G: 45%	E: 30%, C: 20%, G: 50%	E: 50%, C: 30%, G: 20%	E: 15%, C: 25%, G: 60%
50 years	E: 20%, C: 20%, G: 60%	E: 20%, C: 15%, G: 65%	E: 40%, C: 20%, G: 40%	E: 10%, C: 15%, G: 75%
55 years	E: 15%, C: 10%, G: 75%	E: 10%, C: 10%, G: 80%	E: 35%, C: 10%, G: 55%	E: 5%, C: 5%, G: 90%

 

This table demonstrates how the glide path gradually shifts from equities to debt and government securities, ensuring that risk levels automatically reduce as the subscriber’s age increases.

   

Rationalisation of NPS fund names

Separately, the PFRDA has also rationalised the nomenclature of NPS Life Cycle Funds to better reflect their risk-return profiles and equity allocation structures.

 

During its review, the regulator found that the Balanced Life Cycle Fund (BLC) had higher equity exposure than the LC75 fund at certain age points, even though LC75 is categorised as the aggressive option. To avoid confusion, PFRDA has standardised fund names to accurately represent each fund’s investment pattern and risk profile.

 

Why this matters for government employees?

 

Broader investment flexibility: Subscribers can now align their NPS or UPS investments with personal risk tolerance and long-term goals.

 

Parity with non-government subscribers: The move standardises access to high-equity options across subscriber categories.

 

Built-in risk control: Automatic equity tapering provides a smoother transition to safer assets near retirement.

 

This reform, combining flexibility with structured risk management, marks a significant evolution in how central government employees can build their pension wealth.