The Central Government has introduced two new investment options for Central Government employees under the National Pension System (NPS)
and Unified Pension Scheme (UPS): Life Cycle 75 (LC 75) and Balanced Life Cycle (BLC).
This decision comes after long-standing requests from government employees for more investment options similar to those available to non-government customers.
These new options give employees more flexibility in retirement planning, allowing them to manage their retirement funds according to their risk preference and financial goals.
How LC 75 and BLC Work
LC 75 invests up to 75% in equities (stocks) in the early years, gradually reducing to 15% by age 55.
This option is suitable for employees willing to take higher risks for potentially higher returns.
Balanced Life Cycle (BLC) is a modified version of LC 50, with a maximum of 50% investment in equities.
The equity portion decreases gradually with age, offering a more balanced risk approach.
Existing NPS/UPS Options
Before these additions, employees could choose from several other options:
Default Option: Investment pattern determined by the Pension Fund Regulatory Authority (PFRA), where stock investments automatically decrease with age.
Scheme G: 100% investment in government securities, the lowest-risk option with fixed returns.
LC-25: Maximum 25% investment in equity, gradually decreasing after age 35 until 55.
LC-50: Maximum 50% investment in equity, gradually decreasing after age 35 until 55.
Investment Components (ECG Formula)
Life cycle funds divide investments into three main components:
Equity (E): Shares of listed companies. High risk but potentially high long-term returns.
Corporate Bonds (C): Bonds issued by companies. Lower risk than equity, with moderate returns.
Government Securities (G): Bonds issued by the central or state governments. Safest investments, offering lower returns.
Asset Allocation in Life Cycle Funds
| Age (Years) | LC 75 (E:C:G) | LC 50 (E:C:G) | BLC (E:C:G) | LC 25 (E:C:G) |
|---|---|---|---|---|
| Up to 35 | 75:10:15 | 50:30:20 | 50:30:20 | 25:45:30 |
| 36 | 71:11:18 | 48:29:23 | 50:30:20 | 24:43:33 |
| 37 | 67:12:21 | 46:28:26 | 50:30:20 | 23:41:36 |
| 38 | 63:13:24 | 44:27:29 | 50:30:20 | 22:39:39 |
| 39 | 59:14:27 | 42:26:32 | 50:30:20 | 21:37:42 |
| 40 | 55:15:30 | 40:25:35 | 50:30:20 | 20:35:45 |
| 41 | 51:16:33 | 38:24:38 | 50:30:20 | 19:33:48 |
| 42 | 47:17:36 | 36:23:41 | 50:30:20 | 18:31:51 |
| 43 | 43:18:39 | 34:22:44 | 50:30:20 | 17:29:54 |
| 44 | 39:19:42 | 32:21:47 | 50:30:20 | 16:27:57 |
| 45 | 35:20:45 | 30:20:50 | 50:30:20 | 15:25:60 |
| 46 | 32:20:48 | 28:19:53 | 48:28:24 | 14:23:63 |
| 47 | 29:20:51 | 26:18:56 | 46:26:28 | 13:21:66 |
| 48 | 26:20:54 | 24:17:59 | 44:24:32 | 12:19:69 |
| 49 | 23:20:57 | 22:16:62 | 42:22:36 | 11:17:72 |
| 50 | 20:20:60 | 20:15:65 | 40:20:40 | 10:15:75 |
| 51 | 19:18:63 | 18:14:68 | 39:18:43 | 9:13:78 |
| 52 | 18:16:66 | 16:13:71 | 38:16:46 | 8:11:81 |
| 53 | 17:14:69 | 14:12:74 | 37:14:49 | 7:9:84 |
| 54 | 16:12:72 | 12:11:77 | 36:12:52 | 6:7:87 |
| 55 | 15:10:75 | 10:10:80 | 35:10:55 | 5:5:90 |
Benefits of the New Options
Greater Flexibility: Employees can select options based on personal risk tolerance and financial goals.
Guide Path Mechanism: Equity investment automatically decreases with age—LC 75 reaches 15% at age 55, BLC reaches 35%—helping protect against market volatility.
Custom Savings Plans: Employees can create retirement plans according to their preferred balance of risk and return.
