Now, pension funds will be allowed to invest in IPOs

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MUMBAI: The investment universe of pension fund managers (PFMs) will be expanded to top 200 companies from those in the F&O segment with market cap of above Rs5,000 crore, Supratim Bandyopadhyay, chairman, Pension Fund Regulatory and Development Authority (PFRDA), told reporters on Tuesday.

PFMs will also be allowed to invest in initial public offering (IPOs), follow-on public offering (FPOs), and offer for sale issues. The PFRDA will fix t criteria for eligible IPOs and similar primary issues.

Bandyopadhyay said that the proposal to allow withdrawals through Systematic Withdrawal Plans (SWP) instead of annuities is part of a PFRDA bill that has been introduced in the Parliament. Currently NPS subscribers have to use 40% of their corpus to buy an annuity (a fixed pension) at maturity, at the age of 60. An SWP by comparison will give subscribers the choice of when and how much to withdraw from their pension corpus after maturity.

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Besides, the government is likely to make PFRDA the regulator for superannuation funds. Superannuation funds currently operate in a regulatory vacuum. They are given approval by the income tax department and have to abide by the guidelines of the finance ministry. However, the government is in talks with PFRDA, the authority to regulate these funds, Bandyopadhyay added.

Once the PFRDA receives regulatory powers, they will ask superannuation funds to submit their accounts and documents and check whether the guidelines set by the ministry of finance are being observed. If not, they will be given the option to transfer their funds to NPS and become part of the NPS system. He added that there are advantages of transferring superannuation funds to NPS because, in superannuation funds only one-third can be withdrawn tax free at maturity, whereas in NPS, this stands at is 40% of the subscriber’s corpus.

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