New pension plan to allow 20% equity investment

Subscribers of the new pension system (NPS) will soon have the option to invest up to 20% in equity and equity-linked mutual funds. The investment guidelines of non-government provident funds, which also applies to NPS, will be amended in a month's time to allow up to 10% direct investment in equities, according to finance ministry sources.

Under the existing guidelines, up to 10% can be invested in equity-linked mutual funds. NPS, which became operational since January 2004, has a corpus of Rs 2,000 crore now. The funds are likely to be invested in market instruments by June-end in 2008. Currently, the corpus, used by the government to finance deficit, generates only 8% return per annum to subscribers. The returns are expected to go up significantly after funds are invested in market-linked instruments.