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Do you think pension funds should be allowed to invest in the stock market?

This is an old debate which can go on and on. Share market is too risky a place to put one’s hard-earned savings, the one meant for the autumn of one’s life is the refrain of those who are dead opposed to pension funds’ dalliances with the stock market. They have a point.

But the counterpoint is if one plays too safe, what one gets on retirement might be a pittance what with fixed income returns not neutralising the inflation during the period of accumulation. The government’s current policy of calibrated investment in the bourses by pension funds is therefore welcome as it takes a nuanced and balanced position.

Leaving the choice of equity mix to the participants is very wise. And the default mode under which the equity component tapers off with age is equally welcome. There is no harm in investing a part of one’s contributions in equity given the fact that it is the share market that gives the best returns in the long run. Youngsters have the staying power. Those on the verge of retirement ideally should pull their chestnut out of fire.

S. MURLIDHARAN

More Stories on : Pension Plans | For the Asking

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