For Central Government employees mandatorily covered under NPS, the total contribution uploaded in an employee's Tier I account is divided among three PFMs. viz. SBI Pension Funds Private Limited, UTI Retirement Solutions Limited and LIC Pension Fund Limited in a predefined ratio and units are allotted in the subscribers account. For State Government employees mandatorily covered under NPS, the total contribution uploaded in an employee's Tier I account is divided among the three PFMs. viz. SBI Pension Funds Private Limited, UTI Retirement Solutions Limited and LIC Pension Fund Limited in a ratio as decided by the State Government and units are allotted in the subscribers account accordingly. The PFMs invest the money in different financial instruments within the investment guidelines laid down by PFRDA and declare Net Asset Value(NAV) at the end of each business day. Accordingly, based on the NAV units are credited in the subscriber's account. The present value of the investment is arrived by the units held multiplied by the NAV.

In Tier II, the only difference is that the subscriber can select any one of the existing PFMs and can also select the ratio in which his / her money is invested in one or more asset class viz. Equity, Corporate Debt and Government Bonds.

The return under NPS is market driven. Hence, there is no guaranteed/defined amount of return. The returns generated through investments are accumulated and is not distributed as dividend or bonus.

At present under Tier I, there is only one scheme (default) available to Central/State Govt. wherein the contributions are allotted to three Public Sector Pension Fund Managers (PFM) viz. SBI pension Funds Private Limited, UTI Retirement Solutions Limited and LIC Pension Fund Limited and each of the PFM’s invest the funds in the proportion of upto 55% in Government Securities, upto 40% in Debt Securities and upto 5% in Money Market Instruments.

Under Tier II, the sets of assets to be considered for investment are segregated based on their risk{return characteristics)

1. Asset class E : "High return, High risk" (equity market instruments).
2. Asset class G : "Low return, Low risk" fixed income instruments. The best example of this are central government bonds.
3. Asset class C : "Medium return for credit risk" bearing fixed income instruments. Examples of these are bonds issued by firms.

Also known as NAV, this is the price of one unit of a fund. NAV is calculated at the end of every working day between Monday and Friday. It is calculated by adding up the value of all the securities and cash in the fund's portfolio (its assets), subtracting the fund's liabilities, and dividing that number by the number of units that the fund has issued. The NAV increases (or decreases) when the value of the fund's holdings increase (or decrease). NAV of different PFMs may differ. Even the different schemes under the same PFM will have different NAV.

NPS offers an easy option for those participants who do not have the required knowledge to manage their NPS investments. In case subscribers are unable/unwilling to exercise any choice as regards asset allocation, their funds will be invested in accordance with the Auto Choice option. Under this type of investment choice, the investments will be made in a life-cycle fund. Here, the fraction of funds invested across three asset classes will be determined by a pre-defined portfolio. At the lowest age of entry (18 years), the auto choice will entail investment of 50% of pension wealth in E Class, 30% in C Class and 20% in G Class. These ratios of investment will remain fixed for all contributions until the participant reaches the age of 36. From age 36 onwards, the weight in E and C asset class will decrease annually and the weight in G class will increase annually till it reaches 10% in E, 10% in C and 80% in G class at age 55.

Under this type of investment choice, the Subscriber has an option to choose a fund manager and provide the ratio in which his / her funds to be invested among the asset classes.

As mentioned in the offer document of PFRDA, in case of subscribers who have opted 'Auto choice' investment option, the percentage of investment in the asset classes E/C/G will change as per the age of the subscriber as given in the 'Life cycle Investment Matrix'. The change happens on the date of birth of the subscriber. In this process, asset allocation ratio is changed and the existing assets are redeemed and reinvested as per the new ratio of allocation.

In Auto Choice, the proportion of E, C and G is determined by the subscriber's age. At each birthdate of the subscriber, these proportions are adjusted with age as mentioned in the life-cycle matrix.

Scheme Preference change option is not available to Govt. subscribers for Tier I.

For Tier II, the Subscriber has to submit the physical application form (Form-UOS-S3) to change Scheme Preference. However, such changes can be done only once in a financial year. You can submit the request to your POP-SP through whom your Tier II account is activated. Please collect a 17 digit acknowledgement number against your request. The transaction is chargeable.

Yes, subscriber can either check with their POP-SP or can call at CRA's toll free number 1800 222 080 for the status of pending request. Please mention the 17 digit acknowledgement number received from POP-SP against your request.

CRA system will send an e-mail to the Subscriber (if the e-mail ID is available) once the request is processed.

At present, this facility is not available for Tier I account of Central/state Govt. employee. In future, subscriber will have the option of selection of PFM and Investment schemes (as and when PFRDA approves it). For Tier II account, you can request for a change of scheme preference once in a financial year.