New Delhi: India’s Pension Fund Regulatory and Development Authority (PFRDA) may soon allow retirement fund managers to invest in specialized funds focused on infrastructure and alternative investments as the government seeks to leverage the pension corpus to build infrastructure and support nascent businesses.
The pension fund regulator had constituted a committee last year to look at ways to expand the investment avenues for the National Pension System in the private sector.
The committee, headed by former chairman of the Securities Exchange Board of India G.N. Bajpai, is expected to submit its report next month following which PFRDA is likely to approve new products.
“The terms of reference of the committee has taken into account the changing capital markets and the need to have different investment avenues. Once we get the report, we will look into allowing investments in new schemes," R.V. Verma, member, finance, PFRDA, said on the sidelines of a conference organised by the regulator.
Investors may get an option to choose which fund they want the pension fund manager to invest on their behalf.
Currently, private sector subscribers can choose between three investment options-E (investments in predominantly equity markets), G (investments in government securities) and C (investments in fixed income instruments other than government securities). The funds are then invested by the pension fund managers into various asset classes as per the regulations laid down by PFRDA.
But with PFRDA now becoming a statutory regulator with the passage of the PFRDA law, the regulator is in the process of reworking and finalizing all important investment and design guidelines.
The ₹ 73,000 crore plus corpus of the National Pension System can be used to deepen capital markets, aid infrastructure development and promote economic growth, junior finance minister Jayant Sinha said at the conference.
Sinha urged PFRDA to offer more products to subscribers.
“Can we introduce more products that can probably be a bit higher cost but provide a higher return also to subscribers who have a high pension balance and want to invest a part of it in high return funds?" he asked.
Sinha suggested introduction of products such as specialised mutual funds investing in infrastructure, balanced funds, alternate investment funds such as venture capital funds.
It is a good idea to offer more investment options to investors to make the National Pension System a more attractive option, said Suresh Sadagopan, a Mumbai-based financial planner.
“A unit-linked pension plan offers up to eight investment options like balanced fund, index fund and other such options. In comparison, NPS is a very straight product with limited investment options," he said. “The subscriber can always decide whether he wants to go in for the new option or not but the important thing is he will have a wide choice."