The government is also likely to make PFRDA the regulator for superannuation funds. Superannuation funds currently operate in a regulatory vacuum
India’s pension funds will soon be allowed to invest in select publicly listed companies and initial public offerings, the sector regulator said.
Pension Fund Regulatory and Development Authority (PFRDA) chairman Supratim Bandyopadhyay said pension fund managers will get to invest in India’s top 200 listed companies, apart from IPOs, follow-on public offerings, and offers for sale issues. Currently pension funds can only invest in companies with market cap more than ₹5,000 crore which also are in the F&O (futures and options) segment of bourses. The regulator will thus expand the investible universe to the top 200 companies.
The regulator will fix certain criteria for eligible IPOs and similar primary issues, Bandyopadhyay told reporters.
A proposal to allow withdrawals from National Pension System at maturity through systematic withdrawal plans (SWPs) instead of annuities is part of a PFRDA Bill currently in Parliament, Bandyopadhyay said. Currently, NPS subscribers have to use 40% of their corpus to buy an annuity (a fixed pension) at maturity, at the age of 60. An SWP by comparison will give subscribers the choice of when and how much to withdraw from their pension corpus after maturity.
Besides, the government is likely to make PFRDA the regulator for superannuation funds, which currently operate in a regulatory vacuum. Superannuation funds are retirement funds run by corporates. They are given approval by the income tax department, and they have to abide by the guidelines from the finance ministry; however, the government is in talks with PFRDA, the authority to regulate these funds, Bandyopadhyay said.
Once the PFRDA receives regulatory powers, it will ask superannuation funds to submit their accounts and documents and check whether the finance ministry’s guidelines are being observed. If not, they will be given the option to transfer their funds to NPS and become part of the NPS system. He further added that there are advantages to transfer superannuation funds to NPS because, in superannuation funds, only a third can be withdrawn tax-free at maturity, whereas, in NPS, the amount is 40% of the subscriber’s corpus.