‘No plans to allow pension funds to invest in startups’1 min read . Updated: 18 Aug 2021, 12:44 AM IST
- The proposal is not off the table, but ascertaining the right valuation in the space is an issue, PFRDA chairman Supratim Bandyopadhay
Supratim Bandyopadhyay, chairman of the Pension Fund Regulatory and Development Authority (PFRDA), said that there were no immediate plans to allow pension funds, including the National Pension System, to invest in startups. The response comes amid news reports that the government may allow Life Insurance Corp. of India (LIC) and the Employees’ Provident Fund Organisation (EPFO) to invest in startups.
Bandyopadhyay, however, said the proposal is not off the table but ascertaining the right valuation of a startup is difficult.
“NPS pension funds declare a daily NAV (net asset value) unlike EPFO and LIC," he added.
Last month, the regulator gave a conditional approval to pension funds to invest in initial public offerings (IPOs). Pension funds can invest in IPOs with share sales of at least ₹500 crore. The post-IPO market value of the company should also be among the top 200 most valuable companies in India.
The number of private sector subscribers in the NPS has crossed 3 million, Bandyopadhyay revealed. Large fintech players have also started distributing to NPS, including Paytm Money, Bandyopadhyay said. Zerodha is also exploring empanelment with the PFRDA as an NPS intermediary, he added. The number of private sector subscribers has also rebounded by almost 50% in FY22 from a year earlier. A total of 241,000 private sector subscribers joined NPS in FY22 till 12 August compared to 160,000 last year.
NPS intermediaries called points of presence (PoPs) charge 0.25% per contribution to the NPS. The pension fund regulator recently allowed PoPs to empanel individual agents to distribute the NPS. However, no decision has been made on the remuneration, Bandyopadhyay said. NPS has delivered returns of 12.94% over the last 12 years for its equity schemes, 9.92% over its corporate bond schemes and 9.4% over its government bond schemes over the past 12 years, Bandyopadhyay added.
The PFRDA also broadened the investment universe from stocks in the F&O segment with a market cap of ₹5,000 crore to the top 200 companies on BSE and NSE in order to allow pension funds to derive returns from a wider range of stocks. Subscribers also get a tax deduction of ₹1.5 lakh for investment in NPS Tier 1 under Section 80 C and ₹50,000 for investment in NPS Tier 2 under Section 80 CCD (1B).
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