Big News for Pension Planning: Government Adds New LC75 and BLC Investment Options for Central Govt. Employees Under NPS & UPS

The Government of India has announced a significant update for Central Government employees, approving the extension of two new investment options, Life Cycle 75 (LC75) and Balanced Life Cycle (BLC), for those under the National Pension System (NPS) and the Unified Pension Scheme (UPS).

This decision, posted by the Ministry of Finance, comes in response to continued demand from Central Government employees who have been asking for a broader range of investment options, similar to those already available to non-government subscribers.

The new options are designed to provide greater flexibility in retirement planning and allow employees to manage their retirement funds according to their individual preferences.

Your Investment Choices Have Expanded

Under the NPS and UPS, Central Government employees now have a wider range of investment options to choose from:

Default Option: A standard investment pattern defined by the Pension Fund Regulatory and Development Authority (PFRDA).
Scheme G: A low-risk option with 100% of funds invested in Government securities.
LC-25: A Life Cycle fund with a maximum equity allocation of 25%, which gradually tapers down between age 35 and 55.
LC-50: A Life Cycle fund with a maximum equity allocation of 50%, also tapering between age 35 and 55.
BLC (Balanced Life Cycle) (New Option): This is a modified version of the LC50 fund. It allows employees to remain invested in equities for a longer period, as the equity allocation only begins to taper starting from age 45.
LC75 (New Option): This fund allows for a maximum equity allocation of 75%. Like the other LC funds, this equity exposure gradually tapers down between the ages of 35 and 55.

What is a "Glide Path Mechanism"?

The Life Cycle funds (LC25, LC50, LC75, and BLC) operate on a "glide path mechanism". This is an "auto choice" feature where the asset allocation automatically changes based on your age.

As an employee gets older, the fund automatically reduces the percentage invested in equities (stocks) and increases the percentage invested in safer assets like government securities. This strategy helps to protect the retirement corpus from large market fluctuations as the employee approaches retirement age.

Here’s a quick look at how the "glide path" works for the new options:

LC75: An employee up to age 35 starts with 75% in Equity, 10% in Corporate Bonds, and 15% in Government Securities. By age 55, this allocation automatically "glides" down to 15% Equity, 10% Corporate Bonds, and 75% Government Securities.
BLC: An employee starts with 50% in Equity, 30% in Corporate Bonds, and 20% in Government Securities. This 50% equity level is maintained until age 45. After that, it begins to taper, reaching 35% Equity, 10% Corporate Bonds, and 55% Government Securities by age 55.

Key Benefits for Employees

Greater Flexibility and Choice: Employees can now select an investment option that better suits their personal retirement goals and risk preferences.
Broadened Auto Choice Options: These new funds offer more diversified choices for retirement planning.
Support for Informed Planning: Employees are empowered to structure their retirement savings in a way that aligns with their individual risk-return preferences.

Download Original Press Release

Asset Allocation in Life Cycle Funds

The following table (where E=Equity, C=Corporate Bonds, G=Government Securities) breaks down the asset allocation "glide path" for each Life Cycle fund year by year:

Age	LC75	LC50	Balanced LC50	LC25
Up to 35 Years	E: 75%, C: 10%, G: 15%	E: 50%, C: 30%, G: 20%	E: 50%, C: 30%, G: 20%	E: 25%, C: 45%, G: 30%
36 Years	E: 71%, C: 11%, G: 18%	E: 48%, C: 29%, G: 23%	E: 50%, C: 30%, G: 20%	E: 24%, C: 43%, G: 33%
37 Years	E: 67%, C: 12%, G: 21%	E: 46%, C: 28%, G: 26%	E: 50%, C: 30%, G: 20%	E: 23%, C: 41%, G: 36%
38 Years	E: 63%, C: 13%, G: 24%	E: 44%, C: 27%, G: 29%	E: 50%, C: 30%, G: 20%	E: 22%, C: 39%, G: 39%
39 Years	E: 59%, C: 14%, G: 27%	E: 42%, C: 26%, G: 32%	E: 50%, C: 30%, G: 20%	E: 21%, C: 37%, G: 42%
40 Years	E: 55%, C: 15%, G: 30%	E: 40%, C: 25%, G: 35%	E: 50%, C: 30%, G: 20%	E: 20%, C: 35%, G: 45%
41 Years	E: 51%, C: 16%, G: 33%	E: 38%, C: 24%, G: 38%	E: 50%, C: 30%, G: 20%	E: 19%, C: 33%, G: 48%
42 Years	E: 47%, C: 17%, G: 36%	E: 36%, C: 23%, G: 41%	E: 50%, C: 30%, G: 20%	E: 18%, C: 31%, G: 51%
43 Years	E: 43%, C: 18%, G: 39%	E: 34%, C: 22%, G: 44%	E: 50%, C: 30%, G: 20%	E: 17%, C: 29%, G: 54%
44 Years	E: 39%, C: 19%, G: 42%	E: 32%, C: 21%, G: 47%	E: 50%, C: 30%, G: 20%	E: 16%, C: 27%, G: 57%
45 Years	E: 35%, C: 20%, G: 45%	E: 30%, C: 20%, G: 50%	E: 50%, C: 30%, G: 20%	E: 15%, C: 25%, G: 60%
46 Years	E: 32%, C: 20%, G: 48%	E: 28%, C: 19%, G: 53%	E: 48%, C: 28%, G: 24%	E: 14%, C: 23%, G: 63%
47 Years	E: 29%, C: 20%, G: 51%	E: 26%, C: 18%, G: 56%	E: 46%, C: 26%, G: 28%	E: 13%, C: 21%, G: 66%
48 Years	E: 26%, C: 20%, G: 54%	E: 24%, C: 17%, G: 59%	E: 44%, C: 24%, G: 32%	E: 12%, C: 19%, G: 69%
49 Years	E: 23%, C: 20%, G: 57%	E: 22%, C: 16%, G: 62%	E: 42%, C: 22%, G: 36%	E: 11%, C: 17%, G: 72%
50 Years	E: 20%, C: 20%, G: 60%	E: 20%, C: 15%, G: 65%	E: 40%, C: 20%, G: 40%	E: 10%, C: 15%, G: 75%
51 Years	E: 19%, C: 18%, G: 63%	E: 18%, C: 14%, G: 68%	E: 39%, C: 18%, G: 43%	E: 9%, C: 13%, G: 78%
52 Years	E: 18%, C: 16%, G: 66%	E: 16%, C: 13%, G: 71%	E: 38%, C: 16%, G: 46%	E: 8%, C: 11%, G: 81%
53 Years	E: 17%, C: 14%, G: 69%	E: 14%, C: 12%, G: 74%	E: 37%, C: 14%, G: 49%	E: 7%, C: 9%, G: 84%
54 Years	E: 16%, C: 12%, G: 72%	E: 12%, C: 11%, G: 77%	E: 36%, C: 12%, G: 52%	E: 6%, C: 7%, G: 87%
55 Years	E: 15%, C: 10%, G: 75%	E: 10%, C: 10%, G: 80%	E: 35%, C: 10%, G: 55%	E: 5%, C: 5%, G: 90%

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Big News for Pension Planning: Government Adds New LC75 and BLC Investment Options for Central Govt. Employees Under NPS & UPS