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.
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.