Pension regulator seeks investment parity for govt subscribers

Sarbajeet K SenMoneycontrolThe Pension Fund Regulatory and Development Authority (PFRDA) has sought level-playing field for government sector subscribers of National Pension System (NPS) by making all investment instruments that are presently available to the private sector be extended to government employees.The pension regulator has asked the government to extend the alternative investment choices and the two new life-cycle funds introduced in NPS to be made available to the government sector subscribers. These are now limited to private sector subscribers. Government employees are mandatorily covered under NPS, while the scheme is voluntary for private sector subscribers.“We have asked the government to make the same investment choices that are available to the private sector to be extended to government employees. In fact we have been following this very vigorously with the government. They said they are looking at it and it appears they might agree,” Chairman, PFRDA, Hemant Contractor, told Moneycontrol.Private sector NPS subscribers have recently been allowed to invest up to 5 per cent in alternative investments, including a 2 per cent sub-category for private equity and venture capital funds. The other asset classes permitted under the 5 per cent cap are commercial or residential mortgage based securities, Real Estate Investment Trusts, asset backed securities, Infrastructure Investment Trusts and Alternative Investment Funds (AIF Category-I and II).The alternative investments classes is being offered along with the existing asset classes including equity, corporate bond and debt. The pension regulator has also introduced two life cycle fund for private sector subscribers – an aggressive option where equity investment can go up to 50 per cent and another conservative one where equity is capped at 25 per cent. The composition of equity and debt would alter as one goes on with higher allocation towards debt. Before this, NPS had only the moderate life cycle fund where equity investment was capped at 50 per cent.The PFRDA Chairman said the government may be concerned over the financial literacy of a large section of government employees who might not be able to make educated choices. “It is not that they (the government) does not want to make these choices available. What they feel is that the knowledge of finance among government subscribers, mostly the junior-level employees whose knowledge of finance may not be very high. So we are from our side stepping up the efforts to ensure there is more awareness of pension products,” Contractor said.He pointed that the PFRDA is training government official on pensions so that they can in turn train the staff. “The exercise is on nearly six months now,” Contractor said.