Pension regulator opposed to mandatory investments in infrastructure

The pension regulator is opposed to mandatory investments into infrastructure under the National Pension Scheme (NPS). The regulator made its stance clear in the wake of the government's attempt to set up an infrastructure fund with retirement savings.

"The infrastructure debt fund is being created and its modalities are being decided by the ministry of finance. As regards investment, we have consistently said that in pension products the complete market risk is being borne by accountholders, and in such a situation directing investment is not proper on the part of the regulator," said Yogesh Agarwal, chairman, Pension Fund and Regulatory Development Authority (PFRDA). He said pension fund managers should not be hindered from making investments wherever they decide to optimise returns.

''What we have said is that any instrument which has investment grade rating qualifies for investment. If the infrastructure debt fund floats investments which have investment grade rating, investments will happen," he said.

Agarwal indirectly referred to a likelihood of greater allocation of resources towards marketing the scheme. He said, "The Bajpai committee has been constituted to address the lacunae and define who is the principal stakeholder to play the marketing role and push the product." He said the committee and the PFRDA had met with all stakeholders. "I think they are on the same platform. All stakeholders we have met have said that .0009% is an insult to call it a fee... it is actually zero."

The pension regulator was speaking at a Union Bank event to announce the distribution of NPS through its 3,000 branches. Speaking at the event, Union Bank chairman MV Nair said it had been decided to sell the NPS scheme through all its branches as part of efforts to offer a one-stop-shop for all financial needs.

Clarifying that there was no turf war on regulation of pensions, he said,  "The pension products of the insurance companies are being regulated by IRDA while PFRDA is managing the National Pension Scheme. There is no dispute. Financial analysts are already saying that because of various facets of the NPS, people will move from pension products of insurance companies to the NPS. You have already witnessed a trend where Ulips grew when pensions were not available. Now that NPS is there, you will see people moving to this plan," he said.