 "PFRDA allows up to 75% in equity for private NPS")
The Pension Fund Regulatory and Developement Authority (PFRDA) has decided on an additional fund for private sector employees, one to enable them to increase the portion of their money under the National Pension System (NPS) in equity up to 75 per cent, against the present limit of 50 per cent.
Another fund would also be launched, to give an option to private subscribers to lower the portion up to 25 per cent. Both extra choices would be available up to the age of 35 years, after which investment in equity would be reduced every year.
Approval to both funds had been given by the board of directors of PFRDA; only the procedural requirements remain to launch these.
The regulator is also in touch with the government to allow the latter's employees to raise their contribution in stocks, as well as choose even private fund managers under NPS. And, hopes such an approval will come soon, PFRDA chairman Hemant G Contractor told reporters here.
"As you know we have been talking with the government to open up the choice of both the fund managers and investment pattern for government subscribers. These discussions are still on. The proposals are with the government and, hopefully, a decision will be taken up by them very shortly," he said.
Currently, only up to 15 per cent of government employees' funds can be invested in stocks. The proposal is for more funds to these employees -- a moderate life cycle fund, LC-50, with maximum exposure to equity capped at 50 per cent and a conservative life cycle fund, LC-25, with maximum exposure to equity capped at 25 per cent.
The other scheme with all the funds invested in government securities would also be available. Contractor said the government had expressed concern that all employees would not be able to understand the investment patterns and might end by making wrong choices.
PFRDA recently conducted an online survey, involving about 10,000 government employees, central and state. About 48 per cent were pretty aware of financial things, he said. "The level of financial literacy was not as bad as we had thought. Only about 24 per cent had a low score. We passed it on to the government and hope that with the results, the government will be able to take decisions faster," he added.
Currently, pension funds under PFRDA are allowed up to 50 per cent of private sector subscribers' funds in equity. The two new ones proposed -- aggressive life cycle fund with equity allocation up to 75 per cent and a conservative life cycle fund with equity allocation up to 25 per cent -- will be available to private sector employees up to the age of 35 years.
After that, the portion of equity would be reduced by two percentage points, and corporate bonds by one percentage point in case of aggressive funds, and government bonds would be raised up to three percentage points, every year till the age of 55 years, said Badri S Bhandari, member, PFRDA.
The same would be done on a proportionate basis in the conservative fund, he added.
Also, the regulator would allow a subscriber to put a portion of his money in alternative investment funds such as real estate investment trusts, asset-backed securities or units of infrastructure investment trusts. At present, this choice is given to a fund manager and not a subscriber.
PFRDA has also come out with a scheme for recruiting advisers to help subscribers choose regulated pension funds and to assist them to subscribe to these.
Also, a concept note on auto enrolment, for increase in pension coverage by making it obligatory for the small scale sector or micro industries, among others, to enroll their workers in the Atal Pension Yojana A(PY), which could be bundled with a health insurance. Initially, such a scheme could be introduced for anganwadi and ASHA schme workers.
NPS and APY together have 13.4 million subscribers, with total assets under management of Rs 1.45 lakh crore.
CHANGES AHEAD
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PFRDA has decided on an additional fund for private sector employees to enable them to increase the portion of their money under NPS in equity up to 75%; the current limit is 50%
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Another fund would be launched, to give an option to private subscribers to lower the portion up to 25%; both extra choices would be available up to the age of 35 years, after which investment in equity would be reduced every year
- The regulator is also in touch with the government to allow the latter's employees to raise their contribution in stocks, as well as choose even private fund managers under NPS
