Investment norms for pension funds to be recast

Investments in debt securities by pension funds should have residual tenure of not less than three years, PFRDA has said while notifying changes in investment guidelines.

“Debt securities selected for investments should have a minimum residual maturity period of three years from the date of investment by the pension fund,” the Pension Fund Regulatory and Development Authority (PFRDA) said in a notification to all pension funds for the government sector.

At present, there are three fund managers for managing pension corpus of government employees.

They are LIC Pension Fund Ltd, SBI Pension Funds Pvt Ltd and UTI Retirement Solutions Ltd.Besides, it said, the debt securities must have an investment grade rating from at least two credit rating agencies.

Apart from ratings by agencies, pension funds should undertake their own due diligence of assessment of risk associated with securities before investments, it said.

Credit Default Swaps on corporate bonds are also eligible derivative instruments, it said.
These changes have been made to enhance safety of investment by pension funds.
Both NPS Lite and private sector schemes follow the government pattern of investment.

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