If you are a private sector subscriber of National Pension System (NPS), there’s plenty of good news in store for you. So, continue reading! PFRDA now allows private sector subscribers to opt for 75% equity investment. Moreover, PFRDA has also decided to allow partial withdrawals for skill upgrades and new businesses.
In a good decision for the private sector subscribers, the capping on equity investment in active choice by private sector subscribers in the NPS has been increased to 75% from 50%. That said, the rider that the NPS subscribers must pay close attention to is that the equity allocations will be tapered after the subscriber reaches 50 years of age.
According to Hemant Contractor, Chairman, PFRDA, the tapering would be happening to the extent of 2.5% annually for a period of years 10 years. Moreover, the Chairman stated that this decision was taken by the PFRDA Board, and thus, will not require any government approval. The current total private sector scheme assets under management (AUM) of the NPS is Rs.27,900 crore.
In another positive move, the PFRDA has approved changing the investment grade rating from ‘AA’ to ‘A’ for corporate bonds. That said, PFRDA clearly states that pension funds cannot invest more than 10% of their overall corporate bond portfolio in corporate bonds with the rating ‘A’.
According to the PFRDA Board, this initiative will expand the overall investment scope for fund managers while ensuring good credit quality. He added that the lowering of the rating requirement was again a PFRDA board decision and would not require government approval.
In another pleasant move for NPS subscribers, the PFRDA has allowed partial withdrawal for NPS subscribers looking to improve their employability or wanting to acquire new skills through higher education or professional/technical qualifications.
If you are an individual NPS subscriber looking to set-up a new business or acquire a business, there’s good news in store for you. PFRDA will now allow you to make partial withdrawals from your contributions towards new business investment or acquisition. However, the PFRDA stated that the other terms that are applicable to partial withdrawals will remain unchanged in this new scenario.
NPS is one of the most cost-effective investment options in India. On one hand, its low-cost attribute increases your profitability in the long term. On the other hand, it’s a very good way to secure your retired life by ensuring regular flow of income after retirement.
All the good moves listed in this article would encourage individual subscribers to start their own business, aim for higher qualifications, and achieve their long-term goals.