Scope of NPS to be widened as more entities join

The Pension Fund Regulatory and Development Authority is planning to extend the New Pension Scheme to workers in the unorganised sector who cannot meet the minimum annual contribution of Rs6,000 required under scheme.

A low-cost pension scheme is being planned that would cost the workers far less. A nodal group would be set up to advise the approximately 400 million workers in the unorganised sector about which scheme would suit them best. The regulator had set the minimum investment limit of Rs 6,000 per year when it opened up for private citizens.

The pension regulator has also said it may widen the list of assets allowed as eligible equity investments under the NPS so that when the pension fund corpus grows bigger, the higher flow of money into select stocks does not influence their prices. 

Currently, index funds replicating the stocks in BSE's 30-share Sensex and NSE's 50-share Nifty are the only eligible equity investments. The PFRDA reportedly does not want any asset price inflation on account of too much investment chasing too few securities. 

At the moment, the money that goes into equity investment is comparatively low, considering the fact that the pension system was opened to all citizens only in May this year. Since then, 1,200 people have enrolled into the scheme. 

The PFRDA is preparing a separate fund management guideline for corporate entities. The move will enable companies to enter into agreements with fund managers for managing the funds of their employees. ''The road map on corpus management will be announced in the next three to four months,'' a PFRDA official said.

Requests by big employers such as the Indian Banks' Association and the State Bank of India prompted the regulator to work out a separate guideline for corporates and other entities.

The SBI has approached the regulator for managing the retirement money of its employees. The IBA has also shown interest in joining the New Pension Scheme for new recruits. Some self-help groups and PSUs have also approached the PFRDA for the management of their corpus.