Private sector subscribers of NPS can now opt for 75% equity investment

K.R. Srivats | | Updated on: Dec 06, 2021

Hemant Contractor, PFRDA Chairman | Photo Credit: ANINDITO MUKHERJEE

PFRDA also allows partial withdrawals for skill upgrades, new businesses

Pension regulator PFRDA has increased the cap on equity investment in active choice by private sector subscribers of the National Pension System (NPS) to 75 per cent from 50 per cent.

However, this comes with a rider — the equity allocations are tapered after the age of 50.

Speaking to BusinessLine , Hemant Contractor, Chairman of the Pension Fund Regulatory and Development Authority (PFRDA), said the tapering would be to the extent of 2.5 percentage points every year, for 10 years. He also said this was a decision taken by the board of PFRDA, and would not require government approval.

Asked about the possibility of an increase in equity cap for government sector subscribers of NPS, Contractor expressed confidence that developments (fresh proposals) on this front will come shortly.

At present, the NPS’ total private sector scheme assets under management (AUM) stands at ₹27,900 crore.

Investment rating

The PFRDA has also given its nod for a change in the investment grade rating from ‘AA’ to ‘A’ for corporate bonds. However, pension funds cannot invest more than 10 per cent of their overall corporate bond portfolio in ‘A’ rated bonds.

This initiative will enlarge the scope of investment for fund managers while ensuring credit quality. “With the lowering of the rating requirement, possibly some infrastructure companies will get invested in” Contractor said.

He added that the lowering of the rating requirement was again a PFRDA board decision and would not require government approval.

Partial withdrawal

The PFRDA has now also allowed partial withdrawal for NPS subscribers who wish to improve their employability or acquire new skills by pursuing higher education/acquiring professional and technical qualifications.

Further, individual NPS subscribers who wish to set up or acquire a business will also be allowed to make partial withdrawals from their contributions. Other terms applicable to partial withdrawals will remain unchanged.

“We thought this could be useful to people as new types of occupations are coming up. For people who have lost a job and would need better qualification, this would be helpful. This will be allowed within the parameters already set,” Contractor said.

Published on May 03, 2018
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