NPS Auto Choice vs Active Choice: which to pick?

Two ways to run the same account

When you open an NPS Tier I account you make two investment decisions: which pension fund manages the money, and how the money is split between asset classes. The second one is where Auto Choice and Active Choice part ways.

• Active Choice: you decide the split. Equity (E), corporate bonds (C), government securities (G) and a small slice of alternative assets (A), within PFRDA's limits. You can hold up to 75% in equity, according to PFRDA's description of the scheme.
• Auto Choice: you pick a life cycle fund, and the fund manages the split by your age. The fund starts equity-heavy when you are young and moves steadily into bonds and government securities as you near 60.

Neither is better for everyone. The right answer depends on whether you will actually manage an Active Choice mix for 30 years. For how NPS fits in your wider plan, our guide to NPS explained and EPF vs NPS give the background.

How the life cycle funds work

PFRDA offers three Auto Choice funds. From its published scheme details, equity share starts at the same level until age 35, then falls with age:

The rest sits in corporate bonds and government securities. PFRDA's page also lists a fourth fund, LC Aggressive, which keeps equity at 50% until 45 and holds 35% at 55 and above. Check the current menu on the PFRDA site, as PFRDA has been adding options.

Notice what that glide path means: even the aggressive LC75 fund is only 15% in equity in your last five working years. That is deliberate. It protects the corpus from a crash close to retirement, but it also means a long stretch of your accumulation happens at a much lower equity share than the headline 75% suggests.

Does the difference matter? A worked example

Assumptions, an illustration and not a forecast: ₹10,000 a month from age 30 to 60 (₹36 lakh contributed in total), equity earning 11% a year, bonds and government securities 7.5%. For the life cycle funds, we use a straight-line approximation of the glide path between age 35 and 55, which is our simplification, not PFRDA's exact schedule. For Active Choice we assume 75% equity until 50, then stepped down to 15% by 55.

Two things stand out. First, the spread between the most and the least aggressive options is only about ₹46 lakh on a ₹36 lakh contribution, because the glide paths converge in the last decade. Second, the Active Choice path is higher because it holds equity longer, which is also exactly why it carries a bigger drop if markets fall at 48 or 52. The numbers depend entirely on the assumed returns; with equity returning less, the ranking narrows, and with a crash near 50, it can reverse. Try your own figures in the NPS calculator, and compare the pension route with mutual funds in the NPS vs mutual fund calculator.

A third option: the Multiple Scheme Framework

From 1 October 2025, PFRDA allows non-government subscribers to use a Multiple Scheme Framework, where one account can use schemes with a different, higher equity cap. PFRDA's page describes a minimum lock-in of 15 years and charges capped at 0.30% a year for it. The detail matters; read PFRDA's current circular and the NPS Trust page before opting in, as the framework is new and still evolving. The mutual funds vs NPS guide covers how these compare with direct equity funds.

How to choose

Pick Auto Choice if:

• You do not want to review your NPS mix, and you are likely to forget.
• You want a plan that gets safer as you get older without any action from you.
• You are unsure about risk. The default, LC50, is a middle path.

Pick Active Choice if:

• You have an overall asset allocation and want NPS to play a specific role in it, say as the debt anchor or as an extra equity sleeve.
• You are comfortable rebalancing once a year, and sticking to the plan through a fall.
• You want equity to stay higher into your 40s than any life cycle fund permits.

A practical hybrid is common: use a life cycle fund as the default, and move to Active Choice only if you can state in one sentence why your mix should be different. For the allocation question itself, see asset allocation by age and asset allocation and rebalancing.

Other things to know

• Contributions and tax. Your own NPS contribution gets the extra ₹50,000 deduction (old section 80CCD(1B), section 124 in the Income-tax Act, 2025) only in the old regime; an employer's contribution is deductible in either regime up to the limit. NPS tax benefits has the details.
• Exit. Part of the corpus must buy an annuity, so a high equity share at 55 is a risk to the amount you will annuitise.
• Fund manager. Both choices let you pick the pension fund. Compare managers and their charges on the NPS Trust site rather than taking the default.

Reviewing your choice

Whichever option you pick, put a review date in the calendar. For Auto Choice, check once a year that the fund still suits your risk appetite: a person who was comfortable with LC75 at 30 may prefer LC50 once they have a large balance and a family. For Active Choice, rebalance to your target mix, and write down the target so that you do not drift with the market. In both cases compare your pension fund manager's results and charges on the NPS Trust site, since the manager is a separate decision from the asset mix, and look at how your balance compares with the path you assumed in your retirement plan.

This post is for education only and is not investment, tax or financial advice. NPS rules, fund options and tax treatment are changed by PFRDA and the Budget; verify the current position before acting. Illustrations are not forecasts.