Pension in stocks: Risk hedged @50%

Pension regulator,PFRDA,said that it would like to maintain a limit on investment in equities for NPS.

Pension regulator,PFRDA,today said that it would like to maintain the 50 per cent limit on investment in equities for the new pension fund (NPS),regardless of the recommendation of the Bajpai committee.

“We think that at the current stage of pension market in the country,investing more than 50 per cent in equities is not going to be fair to investors in terms of the risk that has to be taken,and therefore,we tend to retain the cap at 50 per cent,” Pension Fund Regulatory and Development Authority (PFRDA) Chairman,Yogesh Agarwal,told reporters on the sidelines of the 26th Skoch Summit here.

The Bajpai Committee,headed by former Securities and Exchange Board of India (SEBI) Chairman,G N Bajpai,has been entrusted with the task of analysing the fee structure and suggesting changes to the National Pension System (NPS).

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Initially,the Government launched the New Pension System for Central Government employees for those joining service from January 1,2004,but it was extended to all citizens from May 1,2009.

Currently,7 pension fund managers are managing assets of about Rs 9,000-crore. Of this,about Rs 100-crore is contributed by pension schemes for persons other than Government employees.

These fund managers include LIC Pension Fund Ltd,SBI Pension Funds Ltd,UTI Retirement Solutions,IDFC Pension Fund Management,ICICI Prudential Pension Funds Management,Kotak Mahindra Pension Fund and Reliance Capital Pension Fund.

Even though the NPS is considered an immensely beneficial financial product for unorganised sector employees,especially those who don’t manage a steady source of income after retirement,it has received a lukewarm response till now.

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To popularise the scheme,PFRDA,in September last year,introduced the Swavalamban scheme. Under this scheme,the Government contributed Rs 1,000 per year to each NPS account opened in the year 2010-11 and for the next

three-years–2011-12,2012-13 and 2013-14.

To be eligible,a person has to make a minimum contribution of Rs 1,000 and maximum of Rs 12,000 per annum.

Agarwal said the Bajpai committee report is “finally being signed” and by the third week of this month,it will be available on the PFRDA website.

On the capital market regulator SEBI Chairman’s views on allowing pension funds to be invested in equities,Agarwal said that if SEBI liked to see more investments in equities,then PFRDA would also like to see the investments,but after ensuring proper risk management.