NPS set to get more investment options

NEW DELHI: The pension regulator has said it may widen the list of assets allowed as eligible equity investments under the New Pension System (NPS) so that when the pension fund corpus grows bigger, the higher flow of money into select stocks does not influence their prices.

Currently, index funds replicating the stocks in BSE���s 30-share Sensex and NSE���s 50-share Nifty are the only eligible equity investments. The Pension Fund Regulatory Development Authority (PFRDA) does not want any asset price inflation on account of too much investment chasing too few securities, said an official who is privy to the development. The proposed modification to the investment guidelines will happen as the NPS corpus attains a critical mass, the official said.

At the moment, the money that goes into equity investment is comparatively low considering the fact that the pension system was opened to all citizens only in May this year. Since then, 1,200 people have enrolled into the scheme.

However, this is set to change. The current NPS corpus amounts to about Rs 6,000 crore with just two state governments bringing the retirement savings of their employees into the scheme, PFRDA chairman D Swarup recently told ET. Rest of the 22 states that have already notified their decision to join the NPS are expected to bring their contribution to the fund corpus soon, making it significantly higher. Besides, the PFRDA is set to launch a nation-wide awareness campaign to get more people secure their retirement lives with the NPS. Once that happens, more funds would flow into these select stocks.

Now, asset management companies that deploy the savings of citizens into various assets are allowed to invest only up to half of the savings of an individual into equities.