PFRDA raises NPS equity investment cap under ‘active’ choice, relaxes withdrawal norms

You will soon be able to opt for higher equity investment under the National Pension System’s (NPS) ‘active’ choice. The Pension Fund Regulatory and Development Authority (PFRDA) board of directors has approved increasing cap on equity investment in ‘active’ choice to 75% from current 50% for Private Sector Subscribers.

Presently there is a cap of 50% on equity investment under active choice in NPS.

A release issued by the PFRDA says that the increase in equity cap comes with a clause of tapering of the equity allocation after the age of 50 years.

PFRDA board has also approved modification in partial withdrawal rules under NPS. Partial withdrawals will now also be allowed to NPS subscribers who wish to improve their employability or acquire new skills by pursuing higher education/acquiring professional and technical qualifications.

Further, individual NPS subscribers who wish to set up a new business/ acquire new business will also be allowed to make partial withdrawals from his contributions. Other terms applicable to partial withdrawals will remain unchanged, the release said.

The board has also approved proposal on changing the investment grade rating from ‘AA’ to ‘A’ for corporate bonds. The change is subject to a cap on investments in ‘A’ rated bonds to be not more than 10% of the overall corporate bond portfolio of the Pension Funds. This initiative will enlarge the scope of investment for the fund managers while ensuring credit quality.

The pension regulator has also given its assent to the introduction of a Common Stewardship Code as a measure of good corporate governance. Further, it was also approved that the principles enumerated in such code shall be circulated to all pension funds for compliance and implementation. Adoption of these principles by pension funds will improve their engagement with investee companies and benefit subscribers, the PFRDA release said.

Currently, NPS and Atal Pension Yojana (APY) have a cumulative subscriber base of over 2.13 crore with total Asset Under Management (AUM) of more than Rs. 2.38 lakh crore.


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