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PFRDA Forms Expert Panel to Modernize NPS Investment Rules for Better Returns

The Pension Fund Regulatory and Development Authority (PFRDA) has formed a Strategic Asset Allocation and Risk Governance (SAARG) committee to comprehensively review the National Pension Scheme's investment framework. Chaired by Narayan Ramachandran, the panel will benchmark NPS guidelines against global standards and the evolving Indian investment ecosystem. The committee's mandate includes examining asset allocation, introducing new asset classes, improving risk management, and expanding subscriber investment choices. It has nine months to submit its recommendations aimed at making the NPS more resilient and aligned with long-term retirement wealth creation.

Key Points: PFRDA Committee to Review NPS Investment Guidelines

  • Review NPS investment guidelines
  • Benchmark with global pension systems
  • Enhance diversification & risk management
  • Expand subscriber choice
2 min read

PFRDA forms committee to thoroughly review NPS investment guidelines

PFRDA forms SAARG committee to review and modernize NPS investment framework for better diversification and long-term retirement wealth creation.

"The objective is to strengthen the investment architecture of NPS to support long-term retirement wealth creation - Finance Ministry"

New Delhi, Jan 25

The Pension Fund Regulatory and Development Authority has constituted a committee of investment experts for Strategic Asset Allocation and Risk Governance to review, recommend and modernise the investment framework under the National Pension Scheme, it was announced on Sunday.

According to Finance Ministry, the panel has been tasked with undertaking a comprehensive review of the existing NPS investment guidelines, benchmarking them with leading global pension systems and the evolving Indian investment ecosystem.

"The objective is to strengthen the investment architecture of NPS to support long-term retirement wealth creation, enhance diversification, improve risk management practices and expand subscriber choice," according to a ministry statement.

SAARG will be chaired by Narayan Ramachandran, former Country Head and CEO of Morgan Stanley India. It will also have eminent experts from the fields of capital markets, asset management and securities law. The committee will have nine months to examine and submit its report to PFRDA with its recommendations.

According to the ministry, the scope includes examination of strategic asset allocation frameworks, introduction and review of asset classes, performance measurement and accountability mechanisms, ALM practices, valuation standards for alternative investments, portfolio stability and liquidity optimisation measures, governance and intermediary architecture, and integration of sustainability considerations in investment decision-making.

The constitution of SAARG reflects PFRDA's continued commitment to strengthening the NPS investment framework in a forward-looking manner and ensuring that it remains resilient, diversified and aligned with the evolving needs of subscribers in their long-term wealth creation journey.

It will review existing NPS investment guidelines for Government and Non-Government Sectors for adequacy, effectiveness and long-term relevance, and benchmark NPS investment architecture with leading global pension systems and Indian peer investment ecosystem and recommend reforms.

It will also review all permitted asset classes and suggest enhancements to improve diversification and long-term retirement wealth creation and introduction of new asset classes to mitigate geopolitical, macroeconomic and market-cycle risks.

It will recommend optimal strategic asset allocation across equity, debt, money market and alternate assets balancing safety, liquidity and returns and define eligible investment universe under each asset class and recommend prudential exposure and concentration limits.

The panel will also review and enhance existing subscriber investment choices including lifecycle and target-date structures and recommend optimal mix of active and passive investment strategies.

- IANS

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Reader Comments

S
Sarah B
As an NPS subscriber, I'm cautiously optimistic. The scope is comprehensive, but execution is key. I hope they simplify the choices for common people. The current tiered system can be confusing for someone not financially literate.
V
Vikram M
Finally! Benchmarking with global systems is the need of the hour. Our pension funds are too conservative. Look at the CPP from Canada or CalPERS. They have delivered stellar returns with smart diversification into alternatives like infrastructure and real estate. India has huge potential in those areas.
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Priya S
While I appreciate the move, I hope this doesn't lead to excessive complexity or higher fund management charges. For the average salaried person, safety and reasonable returns are paramount. Please don't make it another complex financial product that only benefits fund houses.
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Rohit P
Good to see Narayan Ramachandran heading this. He has the right experience. The mention of 'integration of sustainability considerations' is interesting. Will we see an ESG-focused pension option soon? That would be a great step forward.
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Michael C
The nine-month timeline seems reasonable for such a thorough review. The focus on 'portfolio stability and liquidity optimisation' is crucial, especially after global market volatilities. Hope they build a framework resilient to economic cycles.

We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.

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