PM asks states to be flexible on pension funds

Prime Minister Manmohan Singh today asked states to cooperate with the central government proposal to allow investing a part of pension funds in stock markets and other options such as bonds.

"The suggestion is being considered is that pending a resolution of all issues relating to the PFRDA Bill, these accumulated funds may be allowed to be invested in accordance with the investment pattern prescribed for non-government provident funds," Singh said in his address at the Chief Ministers' Conference on Pension Reforms.

The Prime Minister's statement comes at a time when the Left parties are opposing the Pensions Reforms Bill.

Singh said the pattern permitted for non-government provident funds would fetch a superior return for New Pension System (NPS) funds than that given by the government at present without compromising on the safety factor.

As per this pattern, 5% of the funds will be invested in shares of companies that have an investment grade debt rating from at least two rating agencies.

Other broad forms of investment include 25% in central government securities, 15% in state government securities, 25% in bonds and securities of public financial institutions and 30% in any of these three categories.

Central government employees recruited since January 1, 2004, are under NPS, which is based on a defined contribution system as against defined benefit of the old pension system.