PFRDA to retain 50% cap on equity investment in NPS

Pension Fund Regulatory and Development Authority (PFRDA) today said it would like to maintain the 50% limit on investment in equities for the new pension fund.

"We think at the current stage of pension market in the country, investing more than 50% in equities is not going to be fair to investors in terms of the risk that has to be taken, and therefore, we tend to retain the cap at 50%," PFRDA Chairman Yogesh Agarwal told reporters on the sidelines of the 26th Skoch Summit here.

The Bajpai Committee, headed by former Securities and Exchange Board of India (Sebi) Chairman GN Bajpai, has been entrusted with the task of analysing the fee structure and suggesting changes to the National Pension System (NPS).

Agarwal said the Bajpai Committee report is "finally being signed" and by the third week of this month, it will be available on the PFRDA website.

Initially, the government launched NPS for central government employees for those joining service from January 1, 2004, but it was extended to all citizens from May 1, 2009.

Currently, seven pension fund managers are managing assets of about Rs 9,000 crore. Of this, about Rs 100 crore is contributed by pension schemes for persons other than the government employees.

These fund managers include LIC Pension Fund Ltd, SBI Pension Funds Ltd, UTI Retirement Solutions, IDFC Pension Fund Management, ICICI Prudential Pension Funds Management, Kotak Mahindra Pension Fund and Reliance Capital Pension Fund.

Even though the NPS is considered as an immensely beneficial financial product for unorganised sector employees, especially those who don't manage a steady source of income after retirement, it has received a lukewarm response till now.

To popularise the scheme, PFRDA, in September last year, introduced the 'Swavalamban' scheme. Under this scheme, the government contributed Rs 1,000 per year to each NPS account opened in FY11 and for the next three years, FY12, FY13 and FY14.

To be eligible, a person has to make a minimum contribution of Rs 1,000 and maximum of Rs 12,000 per annum.

When aksed about the capital market regulator Sebi's chairman's views on allowing pension funds to be invested in equities, Agarwal said if Sebi liked to see more investments in equities, then PFRDA would also like to see the investments, but after ensuring proper risk management.