New Delhi. The central government is considering increasing the limit of foreign direct investment (FDI) in the pension sector to 100 percent. According to sources, an amendment bill in this regard can be presented in the Parliament in the upcoming monsoon session or winter session. The move will be in line with the insurance sector, where 100 per cent FDI is already allowed.

The government aims to amend the Pension Fund Regulatory and Development Authority (PFRDA) Act, 2013. At present the FDI limit in pension funds is fixed at 49%.
Last year, the government had approved a bill in Parliament to increase the FDI limit in the insurance sector from 74% to 100%. Now similar reforms are going to happen in the pension sector also.

The amendment bill may also include a proposal to separate the NPS Trust from the regulator (PFRDA). Currently the functions of the NPS Trust come under PFRDA rules, which can now be brought under an independent charitable trust or the Companies Act.

According to sources, the NPS Trust will be managed by a competent board consisting of 15 members. The majority in this board will be those members who represent the government (Centre and State). The main reason for this is that government employees and state governments are the biggest contributors to this fund.

The Government of India made the National Pension System (NPS) mandatory for all new government recruits (except the armed forces) with effect from 1 January 2004, replacing the defined benefit pension system. NPS was launched on a voluntary basis for all citizens from 1 May 2009.

Allowing 100% FDI in the pension sector will increase investment by foreign companies, which will increase competition in pension products and customers can get better return options. Also, with the NPS Trust becoming independent, it is expected to bring more transparency and expertise in its management.