NPS offers two kinds of accounts: tier 1 and tier 2.

National Pension System or NPS, a government-sponsored retirement planning instrument, gives the investor the option to set his or her preferred allocation to different asset classes, such as government bonds, equity market instruments and corporate debt, among other features. It gives the investor flexibility in terms of timing of contribution, choice of pension fund, and choice of allocation. However, if the choice is not exercised by the subscriber, NPS contributions are invested in these existing schemes - LIC Pension Fund, SBI Pension Fund and UTI Retirement Solutions, according to National Securities Depository's (NSDL) website - npscra.nsdl.co.in. (Also read: NPS Withdrawal Rules Explained Here)

NPS offers two kinds of accounts: tier 1 and tier 2. While the tier I NPS account is a pension account, the tier II NPS account is a savings account. This means the subscriber is allowed to withdraw money as and when required from the tier II account, but not the tier 1 account.

(Also read: How To Avail Income Tax Benefits Under National Pension System)

Here are the investment options available for NPS subscribers under tier 1:

According to NSDL's website, the central government subscribers have the option of selecting the Pension Funds (PFs) and investment patterns in tier I account. A subscriber can choose any one of the available PFs and investment option as per their choice:

1. Scheme G: 100 per cent of contribution are invested in government bonds and related instruments.

2. Scheme LC 25: It is the life cycle fund where the cap to equity investments is 25 per cent of the total asset.

3. Scheme LC 50: It is the life cycle fund where the cap to equity investments is 50 per cent of the total asset.

How can an NPS subscriber change a scheme preference

A subscriber has the option to change the pension fund manager. At present, the subscriber can change the pension fund manager once in a financial year. There are two options available to the subscriber - online as well as offline.

Subscriber can change scheme preference online through his/her NPS account log-in. Alternatively, the subscriber can also submit physical request (Form GOS-S3) to his/her associated Nodal Office. The form GOS-S3 can be freely downloaded from CRA (Central Record Keeping) Website. On receipt of physical request, the Nodal Office updates the scheme preference in the CRA system.