PFRDA WISHES TO PROTECT INTEREST OF MEMBERS FROM MARKET VOLATILITY
FUND managers overseeing the government’s new pension scheme (NPS) may be allowed to invest only in stocks that comprise benchmark indices — the 30-share Sensex of the Bombay Stock Exchange and the National Stock Exchange’s 50-stock Nifty — as the pension regulator looks to protect the interests of members from market volatility.
The Pension Fund Regulatory Development Authority (PFRDA), which will regulate NPS, may issue a direction in this regard, its head. Keeping in mind the recent global financial crisis and the stock market turbulence. It is not prudent to allow fund managers to put people’s money in just any stock without looking at their fundamentals. The NPS will be available to all individuals from April 1, 2009, and is mandatory for all government employees who have joined service after January 1, 2004.
While savings under NPS from central and state government employees are expected to rise to Rs 6,000 crore soon from Rs 1,700 crore now, contributions from private individuals are expected to add a substantial amount to the scheme’s corpus. PFRDA has set up a panel headed by HDFC executive chairman Deepak Parekh to suggest investment options for contributions from private individuals who could choose more potentially rewarding schemes as per their risk appetite.
The panel is expected to suggest various schemes having a mix of debt and equity options with varying risk appetite. It could recommend equity-focused schemes where up to 60% of savings could go into equity. For the members who do not choose an option, the default option may be a lifecycle fund, which would invest more in equities initially and, as the individual grows old, could shift to safer debt instruments. The panel is expected to submit its report in a month. Under NPS, only 15% of the total funds are allowed to be invested in equities. The investment pattern followed is similar to that followed by the Employees Provident Fund Organisation (EPFO): only 5% of savings can go directly into equities while another 10% can go indirectly via equity-linked mutual funds.
Provident fund trusts operated by private organisations will get greater flexibility next year when the government allows them to invest in equities up to 15% directly or indirectly.
PFRDA has allowed three fund managers — LIC, SBI and UTI Asset Management Co — to manage Rs 1,700 crore of central government employees’ savings. This is expected to go up to Rs 3,000 crore when arrears from a recent wage revision are added. Besides, another Rs 3,000 crore from state government employees are expected to come under PFRDA as five states have signed deals and 17 others have indicated their intention, the official said.
FUND managers overseeing the government’s new pension scheme (NPS) may be allowed to invest only in stocks that comprise benchmark indices — the 30-share Sensex of the Bombay Stock Exchange and the National Stock Exchange’s 50-stock Nifty — as the pension regulator looks to protect the interests of members from market volatility.
The Pension Fund Regulatory Development Authority (PFRDA), which will regulate NPS, may issue a direction in this regard, its head. Keeping in mind the recent global financial crisis and the stock market turbulence. It is not prudent to allow fund managers to put people’s money in just any stock without looking at their fundamentals. The NPS will be available to all individuals from April 1, 2009, and is mandatory for all government employees who have joined service after January 1, 2004.
While savings under NPS from central and state government employees are expected to rise to Rs 6,000 crore soon from Rs 1,700 crore now, contributions from private individuals are expected to add a substantial amount to the scheme’s corpus. PFRDA has set up a panel headed by HDFC executive chairman Deepak Parekh to suggest investment options for contributions from private individuals who could choose more potentially rewarding schemes as per their risk appetite.
The panel is expected to suggest various schemes having a mix of debt and equity options with varying risk appetite. It could recommend equity-focused schemes where up to 60% of savings could go into equity. For the members who do not choose an option, the default option may be a lifecycle fund, which would invest more in equities initially and, as the individual grows old, could shift to safer debt instruments. The panel is expected to submit its report in a month. Under NPS, only 15% of the total funds are allowed to be invested in equities. The investment pattern followed is similar to that followed by the Employees Provident Fund Organisation (EPFO): only 5% of savings can go directly into equities while another 10% can go indirectly via equity-linked mutual funds.
Provident fund trusts operated by private organisations will get greater flexibility next year when the government allows them to invest in equities up to 15% directly or indirectly.
PFRDA has allowed three fund managers — LIC, SBI and UTI Asset Management Co — to manage Rs 1,700 crore of central government employees’ savings. This is expected to go up to Rs 3,000 crore when arrears from a recent wage revision are added. Besides, another Rs 3,000 crore from state government employees are expected to come under PFRDA as five states have signed deals and 17 others have indicated their intention, the official said.
