Logo

Logo

NPS may hike equity exposure for govt staff to 50%

The government is considering raising the stock market exposure of the National Pension System (NPS) for its employees to 50…

NPS may hike equity exposure for govt staff to 50%

Finance Minister Arun Jaitley (PHOTO: SNS)

The government is considering raising the stock market exposure of the National Pension System (NPS) for its employees to 50 per cent from 15 per cent at present. A decision in this regard is likely to be taken soon, highly placed sources in the government told The Statesman.

The Finance Ministry is likely to increase the equity exposure limit for government subscribers, bringing them at par with private subscribers of the NPS, sources said.

All the government employees, both in state and central government, who joined service January 2004 onwards have to compulsorily contribute 10 per cent of their salary to the NPS, which will provide them pension for the lifetime. Any citizen aged between 18 and 60 years can also join the scheme with a minimum contribution of Rs 1000 per annum. When the person reaches the retirement age, at least 40 per cent of the corpus has to be utilised to buy annuities.

Advertisement

Pension Fund Regulatory and Development Authority chairman Hemant G Contractor feels that the employees should be exercising the choice of where the money should go. The PFRDA board has had several rounds of discussions on the proposal. "The ball is now in the Finance ministry's court," he said, hoping the government staff would be allowed to have the flexibility of putting higher percentage of their contributions into equities.

Once the proposal is cleared, the government employees will be able to exercise the choice to invest their pension corpus. Currently, the government is making the investment decision for its employees on a mix of securities, bonds and equities. However, private subscribers have been free to choose the fund allocation pattern with effect from 2009.

The government subscribers account for 88 per cent of the total corpus which has given an average rate of return of around 10 per cent over the last five years.

Currently, only 8 to 9 per cent of their funds are being invested in the equities. For private subscribers, the amount going to equities is around 28 per cent at the moment. Since the government employees' money accounts for the bulk of the NPS fund, the average investment in equities for around 1.5 crore subscribers comes to  around 13 per cent. NPS corpus currently stands at Rs 1.67 lakh crore.

Advertisement