FinMin rules out raising equity investment limit for pension funds

Pension fund
The finance ministry has no immediate plan to raise pension funds’ investment limit to over 15 percent in the equity market. The government perceives any loss in value of the funds due to volatility would prove costly to the government.
“No, there has been no discussion on raising the limit of investing in equities from the current 15 percent for the government employees. Maybe there will be some more maturity needed in the stock market. The proposal is still on the table, but not under active consideration,” an official source said.
The reasons are well known for the government to cold shoulder the proposal. The majority of the subscribers are in the clerical cadre and they don’t have any other backup other than pension funds to fall back upon on retirement. And the important part is if investors lose pension money in the equity market, the government will have to bear that cost. In EPFO also it is the same situation, sources said.
The country has booming pension funds with a size of $35 billion and the equity market is also surging at a valuation of Rs 2.5 lakh crore. But all these are not enough for them to link as there is risk involved in the usual stock market volatility and the government does not want the hard-earned funds of the people at the twilight years to be part of risk game, said the sources.
The Pension Fund Regulatory and Development Authority (PFRDA) has long been demanding an increase in the equity proportion for government employees to invest in the stock market. The PFRDA has called for a huge jump to 50 percent from 15 percent of the fund’s investment to match the maximum for private-sector pensions overseen by its National Pension System arm.
Source: Deccan Chronicle

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