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At least 33,000 NPS subscribers opt for higher equity investment

LiveMint logoLiveMint 11-08-2017 Sahib Sharma

Mumbai: A large number of National Pension System (NPS) subscribers are opting for greater equity holdings in the hope of earning higher returns. Until July-end, more than 33,000 subscribers had opted for the aggressive life-cycle policy, wherein the equity investment proportion is capped at 75% upto the age of 35, according to a person aware of the development, who spoke on condition of anonymity.

Both aggressive and conservative life-cycle funds were introduced by the Pension Fund Regulatory Authority of India (PFRDA) in December. These schemes are not available for government employees who form close to 50% of the total subscribers of 10.7 million at the end of June quarter.

At the end of June, NPS had a corpus of Rs.1.9 trillion, of which 87% was contributed by government employees.

There are three asset classes -- E, C and G -- under which subscribers have the option of investing their money in NPS. Asset class E pertains to equity for which the ceiling was fixed at 50%, prior to the launch of the aggressive fund. Class G invests in government securities and class C in investments other than government securities such as corporate bonds.

According to data compiled by Value Research, one-year returns, as on 5 July, for the equity, government and corporate debt funds, under a tier 1 NPS account, were 17.03%, 11.39% and 10.46%, respectively.

The Employees’ Provident Fund Organisation (EPFO) gave a return of 8.65% in the financial year 2016-17 to its 40 million borrowers. EPFO money is invested only in government securities.

“People tend to take more risk at the early stage of life and since NPS is a long-term product, equity tends to perform well,” said Suresh Sadagopan, founder of Ladder7 Financial Advisories, a financial planning firm.

“Market performance can be a secondary factor for attraction towards equity,” added Sadagopan.

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