NPS architecture
In this chapter: Tier I and Tier II accounts · Asset classes E, C, G, A and PFM choices
NPS has two tiers. Tier I is the mandatory retirement account: locked till 60, 60% lump sum + 40% annuity at maturity. Tier II is voluntary, liquid, no tax benefit but free withdrawals. Within each tier, contributions go into four asset classes: E (Equity, max 75% under 50yr), C (Corporate Debt), G (Government Bonds), A (Alternative — REITs, AIFs).
Choice mode: Active (subscriber chooses allocation) or Auto (lifecycle glide path — Conservative/Moderate/Aggressive). Active mode: equity max 75% under age 50, glides down to 50% by 60. Auto Aggressive: 75% equity max, glides to 15% by 60. Auto Moderate: 50% max equity, glides to 10%. Auto Conservative: 25% max equity, glides to 5%. PFM (Pension Fund Manager): subscriber chooses among ~7 PFMs (HDFC, ICICI, SBI, UTI, etc.). Each PFM's NAV differs slightly; performance over 5+ years matters.
A nuance: most PFMs perform within a narrow band — alpha across PFMs is small. The bigger driver of NPS outcomes is asset allocation choice (Active mode with 75% equity for under-50 typically beats Auto Conservative). For young subscribers, the default Auto mode is often too conservative. Subscribers can change PFM and allocation once a year — exercise this thoughtfully.