The Economic Times - Pension funds must go to Nifty-50 stocks: Panel
18 Feb 2009, 0730 hrs IST, TNN
18 Feb 2009, 0730 hrs IST, TNN
NEW DELHI: The expert committee constituted by the Pension Fund Regulatory and Development Authority (PFRDA) on Tuesday recommended three
investment choices for subscribers of the New Pension System (NPS), while seeking to invest through a standardised Nifty-50 stock portfolio. The NPS is to be launched from April 1.
The committee, chaired by HDFC chief Deepak Parekh, handed over its report to PFRDA chairman D Swarup. The pension fund regulator had earlier shortlisted six fund managers in addition to LIC, SBI and UTI, who will have the mandate to invest upto 50% of an individual's pension fund in equities.
The Nifty-50 stocks would include almost all the top 50 stocks of the BSE, Parekh said, while giving details of the fund investment guidelines. The committee has mooted a thirdparty evaluation of the equities and other investment instruments to be opted by fund managers . The three different investment options under E, G and C category range from highrisk equities to low risk central government securities and a moderate return option under corporate and state government bonds.
Anyone can join the NPS with a proposed minimum investment of Rs 6,000 annually. The minimum investment rule is, however, yet to be formalised. The fund collection would be made using the network of 23 entities selected by PFRDA.
Swarup said the new pension fund would be used as a long-term investment instrument, and, in fact, this may create a long-term debt market for a period ranging between 15-30 years.
Taking lessons from some of the global pension funds which lost all their reserves in the meltdown, it has been proposed that risk to equities factor is reduced to a maximum of 10% towards the retirement age of an employee.At the time of superannuation, the employee receives 60% of the total amount earned through investments and the rest 40% is deposited with an insurance fund manager of the beneficiary's choice from where he receives a monthly pension.
Those who do not make a choice will be assigned auto choice where investment will be made in a life-cycle fund, that is, at the lowest entry age a subscriber's fund will be invested in pre-determined portfolio.
The committee, chaired by HDFC chief Deepak Parekh, handed over its report to PFRDA chairman D Swarup. The pension fund regulator had earlier shortlisted six fund managers in addition to LIC, SBI and UTI, who will have the mandate to invest upto 50% of an individual's pension fund in equities.
The Nifty-50 stocks would include almost all the top 50 stocks of the BSE, Parekh said, while giving details of the fund investment guidelines. The committee has mooted a thirdparty evaluation of the equities and other investment instruments to be opted by fund managers . The three different investment options under E, G and C category range from highrisk equities to low risk central government securities and a moderate return option under corporate and state government bonds.
Anyone can join the NPS with a proposed minimum investment of Rs 6,000 annually. The minimum investment rule is, however, yet to be formalised. The fund collection would be made using the network of 23 entities selected by PFRDA.
Swarup said the new pension fund would be used as a long-term investment instrument, and, in fact, this may create a long-term debt market for a period ranging between 15-30 years.
Taking lessons from some of the global pension funds which lost all their reserves in the meltdown, it has been proposed that risk to equities factor is reduced to a maximum of 10% towards the retirement age of an employee.At the time of superannuation, the employee receives 60% of the total amount earned through investments and the rest 40% is deposited with an insurance fund manager of the beneficiary's choice from where he receives a monthly pension.
Those who do not make a choice will be assigned auto choice where investment will be made in a life-cycle fund, that is, at the lowest entry age a subscriber's fund will be invested in pre-determined portfolio.
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