Under the All Citizen Model, NPS subscribers can change their pension fund once in a financial year. The same frequency is available under the Corporate Model, according to reports from The Economic Times and Zee News. The pension fund serves as the fund manager responsible for investing NPS money in market-linked assets such as equity, corporate bonds and government securities. A change of pension fund does not mean withdrawing money from NPS - your retirement corpus continues within the NPS system while only the fund manager changes. As per Zee News, the Pension Fund Manager manages the money and puts it into government securities, corporate bonds, equities, and alternative assets, and based on their performance, the NPS account gains returns.
NPS subscribers under the All Citizen and Corporate models can change their investment choice or asset allocation up to four times in a financial year. This facility is available separately for Tier I and Tier II accounts, as reported by The Economic Times. Changes include moving between Active Choice and Auto Choice or altering how money is divided among different asset classes. For example, under Active Choice, subscribers may adjust their equity allocation from 70% to debt securities if their risk appetite changes. As per Zee News, the returns are also governed by asset allocation and how you invest the money in assets: Active Choice lets you decide the percentage of money that goes into different asset classes, while Auto Shift shifts the asset mix automatically as time passes.
Experts recommend against switching pension funds based solely on poor performance over a short period, according to The Economic Times and Zee News. NPS is designed for retirement planning spanning 10, 20, or 30 years, and a fund that performs poorly in one year may perform differently during another market cycle. A fund which performs well for a few years is not guaranteed to give better returns in the future, similarly, an underperforming PF may get higher returns in the coming years. The corpus in the NPS account is meant to serve the post-retirement life and thus is a long-term investment, so subscribers should keep a check on the performance but should not decide to change the fund manager for poor performance in a year. Consistency should be the driving force while deciding to switch the pension funds, instead of chasing short-term gains.
Subscribers can change pension funds or investment choices online through their NPS account via the Central Recordkeeping Agency, or offline through Point of Presence (PoP), as reported by The Economic Times and Zee News. Before confirming a switch, subscribers should carefully review their existing allocation and consider long-term performance, consistency, asset allocation, and remaining years to retirement. The important distinction is that pension fund changes are limited to once per financial year, while investment choice changes can be made up to four times. For pension ULIPs like SBI Life Retire Smart Plus, fund switching is available during the policy term without switching charges, though policyholders bear investment risk as returns are not guaranteed.
