Government may allow pension funds to invest in stocks

The Central government will notify an interim investment pattern for funds collected under the New Pension Scheme (NPS) to allow 5% investment of the corpus in stock market and another 10% in AAA-rated corporate bonds.

Since the contributory NPS was introduced for all fresh government recruits in January 2004, about Rs 1,500 crore has accumulated in public accounts at the Centre and in 17 states which have adopted the scheme.

Finance Minister, Mr P Chidambaram said on 22nd januray 2007, that it has been decided to notify the “interim” investment model for funds collected under the NPS. An interim arrangement is being even made since the Pension Fund Regulatory and Development Authority (PFRDA) Bill is awaiting clearance from Parliament.

The initiative will allow more funds to flow into the market and provide an opportunity for better returns to NPS subscribers. The NPS corpus earns only 8% interest at present. The government plans to appoint fund managers to handle the investments

Left parties and Left-ruled states of West Bengal, Kerala and Tripura have however, rejected the proposed investment pattern. They feel that subscribers should not be subjected to risks associated with stock market investments.

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