By Gopika Gopakumar
MUMBAI (Reuters) -India’s pension regulator is looking to widen investment options for private pension funds to drive better returns for subscribers, after it permitted fund houses to launch customised pension schemes earlier this month.
The regulator is considering allowing pension funds to invest in gold and silver exchange-traded funds, venture capital funds, private credit, and alternative investment funds (AIFs), S. Ramann, chairperson of the Pension Fund Regulatory and Development Authority, said in an interview on Friday.
“It is imperative that public policy pushes towards making sure people get a good return from market instruments such that their own individual saving corpus becomes reasonably adequate,” Ramann said.
At present, pension schemes invest mostly in debt and equity.
The regulator is also considering easing norms around marking to market long-dated government and corporate bonds held by pension funds, Ramann said.
The private pension fund industry oversees 15.78 trillion Indian rupees ($178.77 billion) in assets, catering to 80 million subscribers, with the regulator aiming to expand that subscriber base to nearly 300 million by 2030.
Eleven financial firms currently offer pension products to consumers, while several others including Bajaj Finance and Bank of Baroda are in talks to enter the segment, Ramann said.
To draw more interest to the sector, the PFRDA last week permitted private pension fund houses to offer customized investment plans based on a subscriber’s risk appetite. Under the new framework, fund houses can offer schemes where the equity exposure can be 100%, up from the previous cap of 75%.
Fund houses will, however, be asked to adhere to product suitability rules to ensure adequate consumer protection, Ramann said.
“We have to put down guardrails of the suitability of a person from an income perspective, from an age perspective, also from a socio-economic background,” he said. Another important guardrail Ramann mentioned is that savings shouldn’t be allowed to be invested in unlisted equity or large numbers of obscure, low market cap stocks.
To incentivize fund houses to draw in fresh savers, the regulator plans to offer an additional commission of 0.1% of assets under management to entities where at least 80% of subscribers are new to the National Pension System (NPS).
($1 = 88.2700 Indian rupees)
(Reporting by Gopika Gopakumar)
