Central staff may be allowed to invest 50% in equity under NPS

The pension regulator proposes to allow over 16 lakh Central government employees who are members of the National Pension System (NPS) to have the flexibility to choose their investment options and allocate at least 50 per cent, if not more, of their portfolio to equities.

The move is part of the Pension Fund Regulatory and Development Authority’s (PFRDA) plan to harmonise the investment options for the NPS for Central government and private sector members.

Under the current norms, Central government employees can allocate just 5-15 per cent of their portfolio to equities while the remainder is put in fixed-income securities such as government bonds and corporate paper.

In contrast, private sector members could up until now invest half their portfolio in equities; and the regulator proposes to hike it further to 75 per cent.

“With the shift of burden of funding the retirement income resting on the employee, it is important to create a facilitating environment to enable him to plan his retirement judiciously through prudent investments based on his risk appetite,” said the PFRDA in a concept paper, adding that it would “have a cascading impact on the development of the capital market, and the development of the economy as a whole”.

The NPS for Central government employees, which is mandatory for all entrants from January 1, 2004, has 16.57 lakh members and assets under management of over ₹48,000 crore.

“The proposal has been on the table for long and we have been discussing it with the Finance Ministry.

“Now, public comments have been sought, based on which a concrete plan will be finalised in the next couple of months,” said a government official.

Harmonising guidelines

Harmonisation of the investment guidelines for private and government sector NPS was also one of the key recommendations of the GN Bajpai committee.

Noting that this will provide a more “unified pension regime” in the country, the PFRDA has also proposed that all NPS subscribers should have a choice of pension funds across various schemes.

At present, the NPS has different pension funds for the private sector and for Central government employees.

Central government pension funds are restricted to public sector entities — LIC Pension Fund Limited, SBI Pension Funds and UTI Retirement Solutions. The private sector NPS has eight pension funds.

“The default option for Central government employees could continue to be the combination of three public sector pension funds.

“Later, this could be moved to one pension fund from the public sector and finally to any pension fund, selected as default pension fund,” said the PFRDA in its concept paper.

Read at  http://www.thehindubusinessline.com/economy/policy/central-staff-may-be-allowed-to-invest-50-in-equity-under-nps/article8544330.ece

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