Supratim Bandyopadhyay, chairman of the Pension Fund Development and Regulation Authority (PFRDA), said there were no immediate plans to enable pension funds, including the national pension system, to d ‘invest in startups. The response comes amid reports the government may allow Life Insurance Corp. of India (LIC) and the Employees’ Provident Fund Organization (EPFO) to invest in startups.
Bandyopadhyay, however, said the proposal was not ruled out, but it was difficult to determine the right valuation for a startup.
“NPS pension funds report a daily NAV (net asset value) unlike EPFO and LIC,” he added.
Last month, the regulator gave conditional approval to pension funds to invest in initial public offerings (IPOs). Pension funds can invest in IPOs with sales of shares of at least ??500 crores. The market value of the company after the IPO is also expected to be among the top 200 companies in India.
The number of private sector subscribers to the NPS has exceeded 3 million, Bandyopadhyay revealed. Big fintech players have also started distributing to NPS, including Paytm Money, Bandyopadhyay said. Zerodha also plans to work with PFRDA as an NPS intermediary, he added. The number of private sector subscribers also rebounded by almost 50% in fiscal 22 compared to the previous year. A total of 241,000 private sector subscribers joined NPS in fiscal year 22 through August 12, up from 160,000 last year.
NPS intermediaries called points of presence (PoP) charge 0.25% per contribution to the NPS. The pension fund regulator recently allowed PoPs to hire individual agents to distribute the NPS. However, no decision has been made on compensation, Bandyopadhyay said. NPS has generated returns of 12.94% over the past 12 years for its equity programs, 9.92% for its corporate bond programs and 9.4% for its corporate bond programs. State over the past 12 years, added Bandyopadhyay.
The PFRDA also broadened the investment universe of M&O segment equities with a market capitalization of ??5,000 crore to the top 200 companies on BSE and ESN to allow pension funds to derive returns from a wider range of stocks. Subscribers also benefit from a tax deduction of ??1.5 lakh for investment in NPS Tier 1 under section 80 C and ??50,000 for investment in NPS Tier 2 under section 80 CCD (1B).
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