The government notified a hike in the foreign direct investment limit in pension fund management to 74% from 49% under the national pension system (NPS). This step is opening doors for experienced foreign partners in this space and facilitating more competition in the fledgling segment. Pension Fund Regulatory &Development Authority (PFRDA) Act links the FDI ceiling in the insurance sector.
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National Pension System (NPS) was launched in January 2004 for government employees and later in 2009, it was opened to all. There are two types of accounts in NPS – Tier 1 and Tier 2. If a person invests in Tier 1 account then he/she gets an additional tax exemption of up to Rs 50,000. National Pension Scheme is being regulated by PFRDA.
7 Pension Funds in NPS:
- HDFC Pension Management
- ICICI Pru Pension Funds Management
- Kotak Mahindra Pension Fund Management
- LIC Pension Fund
- SBI Pension Funds
- UTI Retirement Solutions
- Aditya Birla Sun Life Pension Management
The benefit of FDI in Pension Funds:
- Many companies need capital for their expansion and due to the increase in FDI limit, they will get more money.
- Existing fund holders will also be able to sell their excess stake.
- Foreign companies will be able to provide new products, technology.
- Help in increasing the reach of pensions.
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