Decision on higher exposure to equity shortly: PFRDA
Hinting at a higher exposure to equity investments for government pension funds soon, Pension Fund Regulatory and Development Authority (PFRDA) Chairman Hemant Contractor on Friday said the government was favourably inclined to the idea and likely to take a decision on raising the limit to 50 per cent from the current 15 per cent in the next couple of months.
“The government is sympathetic. We have had several rounds of discussions with the government in this regard and are hopeful that in the next couple of months, this will happen," the PFRDA chairman said in response to a question on the proposal.
In September 2015 the regulator had suggested to the government that 50 per cent of the government pension funds, which account for 85 per cent of the pension fund corpus and amount to Rs 1,68,000 crore, be invested in equity, on a par with the private pension funds, so that subscribers could get higher returns on their pension fund investments.
The decision to raise the limit for investing in equities would mean more than a Rs 70,000 crore domestic inflow into equity. Pension funds are growing 40 per cent year-on-year for a couple of years. “Since the government subscriber base accounts for the bulk of the funds, this will mean a big change. Lots of money will start flowing into equities once this ceiling is raised to 50 per cent from the present from 15 per cent," Hemant Contractor said on the sidelines of an event on appointing Karvy Computershare as the second Central Record-Keeping Agency by the pension fund regulator.
The ceiling on investments in equities for private pension funds has been enhanced to 75 per cent last year. The pension fund regulator is also pressing for increasing the age limit for the eligibility and the pension slabs under the Atal Bima Yojana.
The subscriber base of pension funds under the National Pension System (NPS), which is around 15 million, has been growing at 35 per cent for two years. It is likely to register similar growth in the next financial year with 10,000 new subscribers coming every day, according to Contractor.
The government pension funds, under the NPS, are managed by the State Bank of India(SBI), Life Insurance Corporation of India(LIC) and UTI while the non-government pension funds under the NPS are handled by seven private financial institutions including ICICI Bank, HDFC Bank and Kotak Mahindra Bank.
The PFRDA is in the process of appointing two more private fund managers to manage the non-government pension funds.