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NPS & UPS: The central government has introduced two new investment options for central government employees under the National Pension System (NPS) and the Unified Pension Scheme (UPS). This will give government employees greater control over their retirement funds, a long-standing demand.
NPS & UPS: The central government has proposed two additional investment options for central government employees under the National Pension System (NPS) and Unified Pension Scheme (UPS). The first is “Life Cycle” and the second is “Balanced Life Cycle.” Central government employees can choose from a variety of investment options under the NPS and UPS. The Finance Ministry stated that two new investment options, Life Cycle and Balanced Life Cycle, have been approved for the NPS and UPS schemes.
The Finance Ministry stated that these options are designed to increase flexibility in retirement planning and allow employees to manage their retirement funds according to their needs. Previously, only private sector employees had access to a wide range of options, but now government employees will also be able to choose from similar options. The Finance Ministry stated that these changes address a long-standing demand from employees seeking greater control over their pension funds.
These are two options for retirement funds.
According to media reports, these new options will help manage retirement funds based on age and risk. NPS and UPS now offer several options. The first is the default option, which is determined by the Pension Fund Regulatory and Development Authority (PFRDA). The second is Scheme G, which invests 100% of the funds in government securities, which offer low-risk and fixed returns. Then comes Life Cycle (LC-25), where equity can be invested up to 25%. This starts at age 35 and gradually decreases until age 55. In LC-50, equity is limited to 50%, whichever is lower between 35 and 55 years.
Simply put, the Life Cycle investment option allows a maximum of 25% of equity investments, which gradually decreases from age 35 to age 55. While the Balanced Life Cycle investment option allows equity investments to begin decreasing from age 45, employees have the opportunity to remain invested in equities for a longer period if they wish. According to the Ministry of Finance, these new options will not only make pension schemes more personalized and customizable, but will also help employees create better financial security for their retirement.
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