PremiumNPS scheme: To make National Pension System (NPS) more lucrative for the NPS account holders, the Pension Fund Regulatory and Development Authority (PFRDA) had given various amendment proposals in the Pension Amendment Bill. Out of those PFRDA proposals, the Government of India (GoI) has accepted raising the FDI limit in pension funds from 49 per cent to 74 per cent and allowing pension funds to invest in IPOs (Initial Public Offerings).
In fact, the GoI has implemented these PFRDA proposals in regard to the NPS scheme as well. The PFRDA Chairman Supratim Bandyopadhyay informed about the government's nod in an exclusive conversation. He said that the nod to raise FDI limit in pension funds and allowing pension funds to invest in IPOs will trickle down to the NPS subscribers' return in the long-term.
Speaking on the PFRDA proposals that have been accepted by the GoI; Supratim Bandyopadhyay, Chairman at PFRDA said, "The GoI has accepted our proposal to raise FDI limit in pension funds from 49 per cent to 74 per cent and has also agreed to allow pension funds to invest in IPOs. Benefit of this GoI nod will trickle down to the NPS account holders' return in the long-term."
Supratim Bandyopadhyay of PFRDA went on to add that earlier pension funds were allowed to invest in those stocks that had ₹5000 crore market capital and at the same time it had presence in the Future & Option or F&O segment. In the changed scenario, a pension fund will be able to invest in top 200 companies of the Indian bourses.
Speaking on how pension fund investment in IPO will lead to rise in NPS subscribers' income; SEBI registered tax and investment expert Jitendra Solanki said, "Raising the FDI limit in pension funds from 49 per cent to 74 per cent will lead to rise in sustainability of the pension funds as they will have more capital for investment. Having being allowed to invest in IPOs, pension funds will have an option to create a new avenue for revenue as a company with strong financials and better business model and outlook is expected to beat the benchmark return in long-term by at least one per cent. This will definitely trickle down to the NPs subscribers in the form of NPS return."
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