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NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Retirement Products

Mr. Rajesh Menon, aged 45, has invested in an NPS Tier I account. Which of the following correctly describes the investment choices available to him under the Active choice and Auto choice options?

Under Active choice the subscriber picks the asset-class split within the permitted limits, whereas Auto choice follows a lifecycle fund that automatically shifts the allocation as the subscriber ages, reducing equity exposure over time. The pension fund manager does not decide the split under Active choice.

  1. AUnder Auto choice, the allocation to equity is fixed at 75% irrespective of age
  2. BUnder Active choice, the subscriber decides the split among asset classes within the prescribed limits, while under Auto choice the allocation is changed automatically with age according to the chosen lifecycle fundCorrect
  3. CUnder Active choice, the pension fund manager decides the asset allocation, while under Auto choice the subscriber decides
  4. DUnder both options the subscriber cannot invest in equity after age 45

Explanation

Active choice lets the subscriber set the split across equity, corporate bonds, government securities and alternatives within limits. Auto choice follows a lifecycle fund that automatically reduces equity exposure as age rises. The other options reverse or misstate these features.

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