Impetus to stock market: PFRDA raises NPS equity investment cap to 75% for private sector subscribers

By: | Published: May 5, 2018 1:32 PM

Private sector subscribers of National Pension System can now opt for investing up to 75% in equities as the Fund Regulatory and Development Authority (PFRDA) has approved increasing cap on equity investment in ‘active’ choice from 50%.

gdp, economy, interest rate, PSU banks, rupee, depreciationNPS offers subscribers to design their own portfolio based on two investment options: Auto Choice and Active Choice. (Reuters)

Private sector subscribers of National Pension System can now opt for investing up to 75% in equities as the Fund Regulatory and Development Authority (PFRDA) has approved increasing cap on equity investment in ‘active’ choice from 50%. More equity investments could give impetus to the stock market.

“Presently there is a cap of 50% on equity investment under active choice in NPS. The proposal on increasing the cap on equity investment in the active choice to 75% from current 50% has been approved by the Board,” the PFRDA said in a statement. Currently, NPS and APY have a cumulative subscriber base of over 2.13 crore with total Asset Under Management (AUM) of more than Rs. 2.38 lakh crore.

NPS offers subscribers to design their own portfolio based on two investment options: Auto Choice and Active Choice. However, the decision to raise the cap came with a clause of tapering of the equity allocation after the age of 50 years.

The PFRDA also allowed partial withdrawals from the fund for studies or business. “Partial withdrawals will now be allowed to NPS subscribers who wish to improve their employability or acquire new skills by pursuing higher education/ acquiring professional and technical qualifications,” the pension authority said.

Partial withdrawals for setting up a new business and acquiring a new business will also be allowed by individual NPS subscribers. The board also approved the proposal to change the investment grade rating from ‘AA’ to ‘A’ for corporate bonds.

NPS earlier known as New Pension Scheme (NPS) was launched in January 2004 and in the initial phase covered the new entrants to the central government services as well as state government and central autonomous bodies. NPS was extended to all citizens of India in May 2009.

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