There are basically three different auto scheme preferences that you can chose from under a Pension Fund Manager (PFM). They are Conservative Auto choice, Moderate auto choice and Aggressive auto choice. The names are self indicative of the jobs each one of the scheme is intended to perform. However, I will still throw some light on each one of them separately.
There was a recent committee constituted by PFRDA to examine the viability of NPS to current generation of investment patterns. Bajpai committee was hence constituted and the committee was of the view that investors in NPS must be able invest upto 100% of their funds into equity. However, the committee also recommended that this should be done over a span of 6 years. Up until now, one could only invest upto 50% of their NPS portfolio in equity and the rest in Corporate and Government Bonds.
Auto Aggressive Choice
Following the recommendations of the committee, PFRDA has made appropriate changes in NPS so as to enable investors to now invest up to 75% of their NPS money in equities. This is the highest possible equity exposure at present under NPS. As you know, higher exposure to equity invariably means higher risk too. And hence this highest exposure to equity is called ‘Auto Aggressive Choice’. Under auto aggressive choice your funds will be invested in:
- 75% – Equities
- 15% – Government Bonds
- 10% – Corporate Bonds
Even if you have chosen ‘Active’ option instead of ‘Auto’ life-cycle fund, 75% is the present cap to invest in equity funds.
The other two are ‘Auto Moderate Choice’ and ‘Auto Conservative Choice’.
Under Moderate Choice, your funds will be invested in:
- 50% – Equities
- 25% – Government Bonds
- 25% – Corporate Bonds
And if you are completely risk averse, the conservative choice will invest your funds equally among all the three available asset classes.
For the uninformed, ‘Auto’ choice is a life-cycle based preference where in your investment patterns will be automatically decided based on your age. Lesser your age, more the exposure to equity and vice-versa