The National Pension System is set to provide a whole new range of choices to its subscribers including option to invest in instruments such as private equity and venture capital funds, real estate investment trusts as well as a higher exposure of up to 75 per cent to equities.
The pension regulator — Pension Fund Regulatory and Development Authority is examining the recommendations of the expert panel led by former Sebi chief GN Bajpai that had recommended greater flexibility to NPS subscribers for their investments.
“We might allocate a small portion (for investment) in alternate instruments like private equity, venture capital funds as well as new instruments such as real estate investment trusts, infrastructure investment trusts and infrastructure development bonds,” said Hemant Contractor, chairman PFRDA.
The Pension Advisory Committee of the PFRDA is understood to have met last month and discussed the recommendations of the committee. An announcement on at least some of the proposals is likely by July.
Speaking to The Indian Express, he further said that the PFRDA is also considering the committee’s suggestion for increasing the equity exposure for both government as well as private sector subscribers of the NPS.
“Currently, there is a cap of 50 per cent for the private sector and 15 per cent for the government. One thing we are looking at is harmonisation of the government pattern and the private sector pattern. We have taken it up with the government, which is now looking at the proposal. So we will have the same kind of pattern for both the government and the private sector NPS,” he said.
Additionally, the PFRDA is also in talks with the government to allow government servants to decide on their investment portfolio on the lines of that provided to private sector members of the NPS.
At present, there is only one default scheme for government employees who are part of the NPS, that provides for investment of up to 55 per cent of the corpus in government securities, up to 40 per cent in debt securities, up to 15 per cent in equities and a maximum of 5 per cent in money market instruments.
Meanwhile, the PFRDA is also considering providing two more default options under the NPS for private citizens. One option would permit allocation of up to 75 per cent of the corpus in equities, whereas the exposure to bonds would be higher in the other.
The expert group was set up in September 2014 to review the investment options for the private sector NPS and it submitted its report to the PFRDA in April year.
Apart from recommendations on addition of new investments, Contractor said that the PFRDA is also reviewing the committee’s suggestions on the asset liability management structure, the method of evaluation of pension fund managers and valuation method for pension funds.
The NPS has cumulative assets under management worth Rs 83,917.12 crore and 91,21,588 subscribers as on April 30, 2015.