How to Switch NPS Fund Manager?

Switching the NPS fund manager provides subscribers the flexibility to align their investments with a manager who offers better performance or fits their investment strategy. Since NPS is a long-term investment vehicle, it’s important to periodically review the fund manager's performance and make changes accordingly to ensure optimal returns.

Steps to Switch NPS Fund Manager:

Log in to Your NPS Account:

To begin the process of switching your fund manager, you must first log in to your NPS account via the official NPS portal or mobile app. You’ll need your Permanent Retirement Account Number (PRAN), which uniquely identifies your account.

Navigate to the 'Fund Manager Switch' Option:

Once logged in, locate the Fund Manager Switch section within your account dashboard. This option allows you to review the current fund manager and explore the list of other authorized NPS fund managers available for selection.

Select a New Fund Manager:

NPS offers a list of registered and authorized fund managers. You can review the past performance, portfolio mix, and risk profile of each fund manager. Choose the one that aligns best with your investment goals (e.g., risk tolerance, expected returns, etc.).

Submit the Switch Request:

After selecting your new fund manager, you need to submit the switch request. This can generally be done online through the portal. You may need to fill out a brief form and provide any necessary details. Ensure that you understand the new fund’s terms and allocations before confirming.

Wait for Confirmation and Processing:

After submitting the request, the switch may take a few days to be processed. During this time, the NPS system will update your account to reflect the new fund manager's investment strategy. This change typically affects your future contributions but may not impact your existing investments immediately.

Review and Modify Investment Allocation:

Along with switching the fund manager, you may also have the option to modify your asset allocation. You can adjust the percentage of funds allocated to different asset classes (Equity, Corporate Bonds, Government Securities). Review and adjust this allocation according to your risk appetite and financial goals.

Confirmation and Account Update:

Once the switch is complete, you will receive a confirmation via email or SMS. Additionally, your NPS account will reflect the updated fund manager and asset allocation details. It’s important to regularly check your portfolio to track the performance of your new fund manager.

Conditions and Considerations:

Frequency of Switch:

You are allowed to switch fund managers only once per financial year, so make sure to carefully evaluate your decision before initiating the switch.

Impact on Existing Investments:

The switch primarily affects future contributions, but if you want to transfer your existing funds to the new fund manager, this is also possible. You can either choose to retain your current investments or move them to the new fund manager. However, this will depend on the NPS rules and may have implications on your returns.

No Fees for Switching:

There are no fees for switching fund managers, and the switch doesn’t incur any penalties. However, there may be processing timelines.

Performance Review:

Before switching, review the performance of the fund manager over the long term, as past performance plays a significant role in future returns. It’s advisable to not make decisions based on short-term performance fluctuations.

Tax Implications:

Switching fund managers doesn't directly affect the tax benefits under Section 80C of the Income Tax Act, but it’s important to understand how the asset allocation of the new fund manager may impact your overall tax planning.

Example:

Let’s say a subscriber, Mr. Sharma, has been investing in NPS under Fund Manager A for several years but has noticed that Fund Manager A has not been performing as expected in comparison to other fund managers. After reviewing the performance of Fund Manager B, he decides to switch. He logs into his NPS account, navigates to the Fund Manager Switch option, and selects Fund Manager B. After submitting the request, the switch is processed within a few days, and his future contributions will now be managed by Fund Manager B. Mr. Sharma also decides to adjust his asset allocation slightly, shifting some funds to government securities for a more conservative investment approach.