The Hindu Business Line : `New pension subscribers may have option of investing 100 pc in G-sec'

THE interim Pension Fund Regulatory and Development Authority (PFRDA) has suggested that subscribers to the New Pension System (NPS) be given the option of the safest-of-the-safe scheme where 100 per cent of the corpus would be invested in Government securities.

This would come as the fourth option to subscribers of the NPS. While framing the sketch for the NPS, the Government had proposed to suggested a choice of three different schemes, each of which would allow varying degree of investment into Government securities, corporate debt and equities.

"We have suggested that the pension regulator could provide a fourth option of a scheme that invests its entire corpus in Government securities. This would provide the maximum possible safety to contributions made by a pension subscriber, though there could be a compromise on the returns side," Chairman, interim PFRDA, Mr D. Swarup, told Business Line.

It is understood that the proposal has also been put forward by the interim PFRDA during its discussion with the Parliamentary Standing Committee that has been studying the proposed pension reforms in order to suggest changes in the Bill to set up a statutory pension regulator.

The existing three options that pension funds managers would be allowed to offer in the NPS are commonly referred to as the Growth, Balanced and Safe options though in official parlance it is referred to as options A, B and C.

While in the `growth' option a pension fund manager would be allowed to invest its corpus up to 50 per cent in equities, 20 per cent in corporate bonds and 30 per cent in government paper, the portfolio managers of a balanced fund would have to split their investment in different proportions with the leeway in equity investments reduced to 40 per cent along with the remaining 60 per cent being equally split of between Government securities and corporate bonds.

Incidentally, the `safe' option too permits investment of up to 10 per cent in equities, whereas the percentage of Government paper goes up to as high as 60 per cent and the remaining 30 per cent in top-rated corporate bonds.

The suggestion of the 100 per cent Government securities scheme could be more palatable to the Left parties that have voiced serious concern over the future of subscribers' monies under the NPS.

The Left have expressed concern that handing over pension accumulations to private pension fund managers could ultimately lead to an erosion of the contributions made by subscribers.

The report of the Standing Committee on pension reform is to be tabled in Parliament during the first few days of the forthcoming monsoon session. It is believed that the Left leaders in the committee would append dissent notes on the proposed reforms.

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