The Pension Fund Regulatory & Development Authority (PFRDA) has urged the Finance Ministry to allow “life cycle funds” as an investment option for government employees who are subscribers of the National Pension System (NPS).
This option should be provided under the equities category of investments under NPS , PFRDA Chairman Hemant Contractor told a press conference here.
With interest rates in the system coming down, there is a distinct possibility that overall returns of government-NPS will be affected if avenues to better returns are not provided.
The PFRDA is of the view that providing an option of investing in ‘life cycle funds’ will improve equity returns, just as increasing the overall cap of equities to 50 per cent from the current 15 per cent will improve overall returns for government-NPS, Contractor said.
Government-NPS subscribers have not been able to make the most of the recent bull market due to the cap on their equity exposure, he addeed.
Currently, for government employees, the equity exposure on NPS contributions has been capped at 15 per cent. There is no explicit option for them to choose “life cycle funds” — both aggressive and conservative oriented funds, Contractor said.
The PFRDA Chairman further said that the assets under management (AUM) of the pension sector grew ₹37,421 crore during April-October this year to touch ₹2,11,983 crore. For FY’17, AUM grew Rs 55,751 crore to touch Rs 1,74,561 crore.
The AUM growth has been led by increased contributions from government-NPS, which now account for about 86 per cent of the total NPS assets under management, he said.
He also felt that AUM growth this fiscal would surpass last year’s increase if the current trend were to persist and the expected growth in Atal Pension Yojana (APY) were to materialise by end-March next year.
The APY subscriber base stands at 69.67 lakh as of end October, against 24.61 lakh in March 2016 and 48.64 lakh in March 2017. The Centre has set an APY subscriber target of 1 crore by March 2018. .
Contractor also said that to apply for partial withdrawal in NPS, the minimum required years of subscription was reduced from 10 to three years. Also, the existing guidelines of the requirement of five years gap for applying for next partial withdrawal has been dispensed with. This new dispensation is effective from August 10 this year.
This report was amended on November 10, 2017. For FY’17, AUM grew Rs 55,751 crore to touch Rs 1,74,561 crore, and not Rs 74,561 crore as an earlier version said.