Active Choice
Also written NPS Active Choice · Active investment choice
The NPS investment option under which the subscriber sets the split across the E, C, G and A asset classes personally, subject to a 75 percent cap on equity and 5 percent on alternatives.
In plain language
An NPS subscriber has to decide how the money is invested, and there are only two answers: pick the mix yourself, or let age pick it for you.
Active Choice is picking it yourself. You state what percentage goes into each of four asset classes and the pension fund invests accordingly. Auto Choice is the alternative — a life-cycle fund that shifts out of equity as you age, without you doing anything.
If you say nothing at all, the NPS does not leave the money idle. The default is Auto Choice, Life Cycle 50 (Moderate).
How it works
Four asset classes are on the menu:
| Class | What it holds | Risk and return |
|---|---|---|
| E | Predominantly equity market instruments | High / high |
| C | Fixed income other than government securities | Medium / medium |
| G | Government securities | Low / low |
| A | CMBS, MBS, REITs, AIFs, InvITs, Basel III Tier-1 bonds | High / high |
Two caps bind under Active Choice: E cannot exceed 75 percent and A cannot exceed 5 percent. Asset class A is available only under Active Choice, and not at all for Tier-II contributions.
The operating rules the paper tests:
- The investment option and the asset allocation ratio may each be changed four times in a financial year for All Citizen and Corporate subscribers, and the change applies to the existing corpus as well as to future contributions.
- The pension fund may be changed once a year.
- Under Active Choice only, a Tier-I subscriber in the All Citizen or Corporate model, and any Tier-II subscriber, may appoint up to 3 pension funds by asset class — except for asset class A.
- Government and UPS subscribers have their own expanded menu since December 2025: a Default Scheme run by the three public-sector funds, Active Choice with 100 percent in Government Securities, and four Auto Choice life-cycle funds.
A worked example
A 40-year-old All Citizen subscriber has a Rs 60 lakh Tier-I corpus and wants maximum growth.
Under Active Choice, at the caps:
E 75% → Rs 45,00,000
A 5% → Rs 3,00,000
C 10% → Rs 6,00,000
G 10% → Rs 6,00,000
Under Auto Choice, Life Cycle 50 (Moderate) — the default — the glide path at age 40 is fixed by the workbook's table at 40 / 25 / 35 across E / C / G:
E 40% → Rs 24,00,000
C 25% → Rs 15,00,000
G 35% → Rs 21,00,000
Same subscriber, same age, same corpus: Rs 45 lakh of equity against Rs 24 lakh — a gap of Rs 21 lakh, purely from which box was ticked on the form. Add the Rs 3 lakh of asset class A, which Auto Choice cannot hold at all, and the growth-asset gap is Rs 24 lakh.
The workbook's own illustration is more conservative — 50 percent E, 25 percent C, 25 percent G — and it makes the adviser's point alongside it: under Active Choice the subscriber must personally shift toward C and G as retirement approaches. Under Auto Choice the reallocation happens automatically on the subscriber's birthday. Active Choice buys freedom and hands back a chore.
Why NISM asks about it
Chapter 4, section 4.2.2 (Investment Options under the NPS), defines Active Choice, Auto Choice and the four asset classes, and carries the full life-cycle glide-path table. This is one of the densest examinable sections in the paper. Expect the two caps as a direct recall question, the default-on-silence question (Auto Choice LC50), the four-changes-a-year limit, and comparison questions asking which option suits a subscriber who does not want to make rebalancing decisions.
Common exam traps
- 75 percent is the Active Choice equity cap for Common Schemes. It is not 100 percent. Equity up to 100 percent is possible only in the high-risk variant of a Multiple Scheme Framework scheme, and in a Tier-II account, which the workbook says may hold up to 100 percent equity.
- Asset class A is capped at 5 percent, is Active-Choice-only, and is not available in Tier II. Three separate restrictions on one asset class, and questions test them separately.
- Silence is not Active Choice. No selection means Auto Choice LC50 (Moderate).
- Four changes a year applies to the investment option and to the asset allocation; the pension fund changes once a year. Two different frequencies, routinely swapped in options.
- Government subscribers' Active Choice is a different animal. Under the expanded December 2025 menu it means 100 percent in Government Securities, not a free split.
- A change applies to the whole corpus, not just new money. The workbook is explicit that the change affects the accumulated corpus as well as prospective subscriptions.
Check yourself
1.Under Active Choice in a Tier I account, what are the maximum permitted allocations to equity (E) and alternative investments (A)?
- a)100% in E and 25% in A
- b)75% in E and 5% in A
- c)50% in E and 10% in A
- d)65% in E and 15% in A
Show the answer
Answer: (b) 75% in E and 5% in A
"The only restriction is that THE PROPORTION INVESTED IN ASSET CLASS E CANNOT EXCEED 75 PERCENT and that in ASSET CLASS A IS RESTRICTED TO 5 PERCENT."
These are not soft guidelines. An application breaching either is rejected outright: ⚠️ "In case of active choice, IF THE ALLOCATION TO EQUITY (E) CATEGORY EXCEEDS 75 PERCENT AND/OR ALTERNATIVE INVESTMENT PRODUCTS (A) CATEGORY EXCEEDS 5 PERCENT, THE APPLICATION SHALL BE REJECTED" — as is one where the asset allocation does not add up to 100 percent.
Two places where higher equity is possible: ⚠️ Tier II schemes can invest up to 100% in equity, and the MSF high-risk variant permits up to 100% — described as a departure from the 75 per cent equity cap that continues to apply to Common Schemes.
And one where it is lower: a subscriber joining beyond 65 is capped at 15% under Auto and 50% under Active.
Where this is taught
Free preparation for NISM Series X-BRelated terms
- Asset allocationThe decision on how to distribute a client's wealth across asset classes — the first decision in building a portfolio, and the one that explains most of what the portfolio then does.
- Auto ChoiceThe NPS option under which contributions go into the lifecycle fund — a dynamic allocation determined by the subscriber's age, with exposure to equity decreasing and exposure to corporate bonds and government securities…
- Multiple Scheme FrameworkThe PFRDA framework, effective 1 October 2025, that lets non-government NPS subscribers hold branded pension-fund schemes alongside the existing Common Schemes under a single PRAN at each CRA.
- National Pension SystemA PFRDA-regulated, defined-contribution retirement scheme in which the subscriber builds a market-linked corpus and must convert part of it into an annuity at exit; there is no guaranteed return.
- Central Recordkeeping AgencyThe intermediary that holds every NPS subscriber record — it issues the PRAN, unitises contributions at scheme NAV and sits between the subscriber, the pension funds and the trustee bank.
- Unified Pension SchemeAn option under the NPS for Central Government employees, effective 1 April 2025, that adds an assured payout of 50 percent of the last 12 months' average basic pay after 25 years of qualifying service.