Government Expands Pension Investment Choices For Central Employees With Two New Life-Cycle Funds

The government of India has approved the expansion of investment choices under the National Pension System (NPS) and the Unified Pension Scheme (UPS) for central government employees by giving them access to two additional “auto-choice” life-cycle funds: LC-75 and balanced life cycle (BLC), according to a recent press statement by the Press Information Bureau (PIB). This decision seeks to provide greater flexibility in retirement savings strategies, acknowledging the demand from employees of the central government to have access to the same array of options that non-government NPS subscribers already enjoy.

More Flexibility In Retirement Planning

Under the revised structure, central government employees will now be able to choose from the following investment patterns: (i) the default option, where the investment asset-allocation is as designated by the Pension Fund Regulatory and Development Authority (PFRDA); (ii) “Scheme G” – investing 100 per cent in government securities, for those seeking very low risk and stable returns; (iii) LC-25 (maximum equity allocation of 25 per cent); (iv) LC-50 (maximum equity 50 per cent); (v) BLC—a modified form of LC-50, with the tapering of equity allocation beginning from age 45, thus allowing employees to stay invested in equities for a longer period; and (vi) LC-75 (maximum equity allocation of 75 per cent).

The key benefits identified by the ministry include enhanced freedom of choice—employees can now pick the option that aligns with their risk appetite and retirement goals. The “glide-path” approach means that equity exposure will gradually reduce with age, protecting the retirement corpus from major market shocks as one approaches retirement—for instance, under LC-75, the equity component will reduce to 15 per cent by age 55, and under BLC to 35 per cent by the same age.

By extending these additional life-cycle fund options to government employees, the government has broadened the auto-choice fund portfolio available to them, and thereby supported more informed planning of retirement savings in terms of risk and return trade-offs. This move is in line to offer diversified retirement-investment alternatives suited to individual preferences, rather than a one-size-fits-all allocation.

Range Of Options To Match Risk Appetite

In the annex to the release, detailed tables show how the asset allocation (equity “E”, corporate debt “C”, government securities “G”) evolves by age across different life-cycle options (LC-75, LC-50, Balanced LC-50, LC-25). For example, under LC-75, an individual up to age 35 would have 75 per cent in equity, 10 per cent in corporate debt, and 15 per cent in government securities; as the individual ages, the equity proportion reduces gradually.

In sum, the ministry’s approval marks a significant enhancement of retirement-planning flexibility for central government employees under NPS/UPS, aligning the available options more closely with those of non-government subscribers and offering a better match of investment strategy to personal risk-return preferences.