NPS 2025: Enhanced Investment Choice Options and Updated Life Cycle Funds Explained
The Pension Fund Regulatory and Development Authority (PFRDA) has introduced significant updates in NPS 2025, offering Central Government (CG) subscribers a broader range of investment choices and clearer Life Cycle Fund structures. These changes aim to provide subscribers with more flexibility, better risk alignment, and improved transparency in how their retirement savings are managed.
Understanding the Existing Investment Choices Under NPS
Before the enhancements introduced in 2025, Central Government subscribers could choose from the following investment options:
1. Default Scheme
Under the Default Scheme, contributions are invested automatically according to a predefined allocation pattern managed by three Pension Funds.
The asset allocation includes Government Securities, Debt Instruments, Equities (up to 25% from April 2025), Money Market instruments, and Asset-backed investments.
This structured allocation ensures stability and long-term growth.
2. Active Choice (100% G-Sec)
Subscribers who wish to avoid equity exposure can select this choice, where 100% of funds are invested in Government Securities — suitable for those seeking high safety with predictable returns.
3. Auto Choice – Life Cycle 25 (LC25) – Low Risk
Here, 25% equity exposure is maintained until the age of 35.
After that, equity allocation gradually reduces and stabilizes at 5% by age 55, continuing until exit.
This option suits highly conservative investors.
4. Auto Choice – Life Cycle 50 (LC50) – Moderate Risk
This medium-risk option keeps 50% equity exposure until age 35, then gradually tapers to 10% equity by age 55.
It balances growth and stability.
Notably, only around 4% of Central Government subscribers had opted for alternatives to the Default Scheme before 2025, highlighting the need for more flexible options.
New Investment Choice Options Under NPS 2025
In line with the latest Gazette notification, PFRDA has introduced two additional Auto Choice options to offer greater customization based on individual risk preferences.
1. Auto Choice – Life Cycle 75 (LC75) – High Risk
- 75% equity exposure until the age of 35
- Gradually tapers to 15% equity at age 55
- Ideal for subscribers seeking higher long-term returns through substantial equity participation
2. Auto Choice – Life Cycle – Aggressive (LC-Aggressive)
- 50% equity exposure until age 45
- Equity allocation tapers to 35% by age 55
- Suitable for those preferring higher equity exposure for a longer period
These new choices allow subscribers to align their NPS assets more closely with personal financial goals, especially for those willing to tolerate greater risk for potentially higher returns.
Requirement for Subscribers Opting Beyond the Default Scheme
Subscribers selecting any of the five non-default investment options must:
✔ Choose one of the available non-default investment schemes
✔ Select one Pension Fund from the ten PFRDA-registered Pension Funds
PFRDA encourages subscribers to review fund performance regularly. Updated PF-wise and scheme-wise performance data is available on the NPS Trust website (www.npstrust.org.in).
Rationalization of Life Cycle Fund Naming in NPS 2025
To maintain consistency and clarity, PFRDA has reviewed and updated the nomenclature of Auto Choice / Life Cycle (LC) Funds.
This rationalization aligns fund names with their actual asset allocation patterns and tapering structures as specified in the circular dated 17 October 2025.
The initiative enhances transparency, helping subscribers make more informed choices.
Asset Allocation Under the Default Scheme (Annexure I)
| Category | Investment Pattern | Maximum Allocation |
|---|---|---|
| Government Securities | Up to 65% | |
| Debt Instruments | Up to 45% | |
| Equities (limit increased to 25% from 1 April 2025) | Up to 25% | |
| Money Market Instruments | Up to 10% | |
| Asset-Backed / Trust Structured Investments | Up to 5% |
This diversified structure aims to achieve long-term returns while safeguarding subscriber funds against market volatility.
Implementation and Legal Basis
The enhanced investment choices have already been made available to CG subscribers through Central Recordkeeping Agencies (CRAs).
The circular has been issued under the powers granted to PFRDA under:
- Section 14(2)(b) and Section 23 of the PFRDA Act, 2013
- Regulation 14(1) of the PFRDA (Pension Fund) Regulations, 2015
These regulatory foundations ensure that changes under NPS 2025 are transparent, lawful, and aligned with long-term pension reforms.
Conclusion
The updates introduced under NPS 2025 provide government employees with a wider and more refined set of investment choices. Whether subscribers want conservative strategies, balanced growth, or high-equity exposure, the enhanced structure ensures that each individual can tailor their retirement savings to their risk appetite and life stage.