The Pension Fund Regulatory and Development Authority on October 1st 2024, introduced a new life cycle fund for private sector subscribers (Corporate and All Citizen) to provide automatic rebalancing of the asset classes as per age and risk profile of the subscriber. The new life cycle fund is the Balanced Life Cycle Fund (BLC). This fund is designed to offer NPS subscribers flexibility and higher growth potential by focusing on equity investments during their prime working years.
Key features of the Balanced Life Cycle Fund (BLC)
Allocation of Equity: The BLC allows subscribers to allocate up to 50% of their investments into equities until the age of 45.
This is higher compared to other life cycle funds like LC 50, which begin reducing equity exposure from the age of 35.
After 45, the equity allocation gradually reduces each year to minimize risk.
Automatic rebalancing: The fund automatically adjusts the mix of equity (Asset Class E), corporate bonds (Asset Class C), and government bonds (Asset Class G) as the subscriber ages. These rebalancing lowers risk as individuals near retirement.
For example, by age 55, equity exposure is reduced to 35%, with a higher focus on safer investments like government bonds.
Reduced risk with age: As subscribers gets closer to retirement, the fund shifts to a more conservative approach.
The maximum equity allocation under BLC shall be 50% which shall taper down after the age of 45 years as compared to 35 years under existing life cycle funds. The asset class wise distribution at different ages shall be as under:
| Balanced Life Cycle Fund (BLC) | |||
| Age | Asset Class E | Asset Class C | Asset Class G |
| Upto 45 Years | 50% | 30% | 20% |
| 46 Years | 48% | 28% | 24% |
| 47 Years | 46% | 26% | 28% |
| 48 Years | 44% | 24% | 32% |
| 49 Years | 42% | 22% | 36% |
| 50 Years | 40% | 20% | 40% |
| 51 Years | 39% | 18% | 43% |
| 52 Years | 38% | 16% | 46% |
| 53 Years | 37% | 14% | 49% |
| 54 Years | 36% | 12% | 52% |
| 55 Years and beyond | 35% | 10% | 55% |
Who benefits
The Balanced Life Cycle Fund is aimed at private sector employees and all-citizens model subscribers who want a hands-off, age-based investment strategy. The fund suits individuals seeking a balanced approach to growing their retirement corpus while automatically managing risk as they age.
How does it work
The BLC works by adjusting the asset allocation as the subscriber moves through different life stages:
Up to age 45: Equity allocation is at its peak at 50%, allowing for significant growth potential.
After 45: The equity portion gradually decreases every year, shifting towards more conservative investments like bonds.
This design provides younger investors with growth opportunities while progressively reducing their risk as they approach retirement.
IMPORTANCE :
The introduction of the Balance Life Cycle Fund expands the investment choices available under the NPS particularly for those who want more control over their risk exposure as they age.
The option for higher equity allocation up to age 45 could help subscribers build a larger retirement corpus over the long term.
The existing choices under NPS, viz. “Active” and “Auto” Choices, shall remain unchanged and the “Balanced Life Cycle Fund” (BLC) shall be an additional investment choice
The existing “Moderate Life Cycle Fund (LC50)” shall continue to be the default choice.
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