Govt may raise equity exposure limit for National Pension System funds to 75%

10 September 2016

The government is looking at a proposal to increase the permissible limit of equity exposure limit for investments in National Pension System for its employees to around 75 per cent and a decision on it is expected soon, Pension Fund Regulatory and Development Authority (PFRDA) said on Thursday.

A decision to hike equity exposure limit will allow employees to raise their contribution in stocks as well as choose fund managers under the New Pension System, the pension fund regulator said.

PFRDA has introduced two additional life cycle schemes for the subscribers of National Pension Scheme, of which one will allow a maximum investment of 75 per cent in equities while the other will allow equity allocation of 25 per cent.

Currently, pension funds under PFRDA are allowed to invest up to 15 per cent of the corpus of government employees' contribution to pension funds into the stock market against 50 per cent for private sector employees.

The two funds – Aggressive Life Cycle Fund and Conservative Life Cycle Fund – are subject to government's approval.

NPS subscribers will also get to choose from various instable securities, including commercial mortgage-based securities, units issued by Real Estate Investment Trusts (REITS), asset-backed securities, units of Infrastructure Investment Trusts under alternative investment funds (AIF) registered with Sebi.

A Bloomberg report quoting PFRDA chairman Hemant Contractor said NPS subscriber base has grown around 120 per cent.

PFRDA is in the process of floating a proposal to select fund managers for non-government funds, which will be out in a week's time.