Subscribers of the National Pension System (NPS) can now expect higher returns as the PFRDA has now amended its regulations providing more flexibility to the fund managers for making equity investments. According to the new guidelines, the pension fund managers can now make investments in Initial Public Offerings (IPOs), follow-on public offerings (FPOs), and offer for sale (OFS) of companies.
Further, investments would be allowed in the top 200 listed companies at the stock exchanges- BSE and the NSE referred to as the BSE 200 and NSE 200 respectively.
The new guidelines will lead to an increase in the equity share of the pension fund, said Supratim Bandyopadhyay, chairman of Pension Fund Regulatory and Development Authority (PFRDA). Fund managers will be able to invest in the upcoming IPOs, he added.
While the risk proportion in equity investments is higher, it can also provide greater returns to the NPS subscribers. The NPS has more than 4 crore subscribers across the country and the fund managers have a collective investment of one lakh crore in the equities through the pension fund. It provides a return of 11 percent to the subscribers.
The regulatory body has also raised the foreign direct investment(FDI) limit from existing 49 percent to 74 percent by making changes in the PFRDA Act, thus allowing existing and new fund managers to sell their stakes to foreign entities. The increased FDI limit is expected to make the pension fund market more attractive to foreign investors, leading to higher investments and returns.