Following the recent hike in Dearness Allowance (DA), the government is now preparing to roll out significant reforms in the pension sector and the National Pension System (NPS). According to a Jagran.com report, the Centre is considering raising the Foreign Direct Investment (FDI) cap in the pension sector from 49 per cent to 100 per cent . An amendment bill for this proposal is likely to be introduced in the upcoming Monsoon or Winter Session of Parliament.

Here’s a clear look at what these proposed changes could mean and how they may impact NPS holders:

Government’s plan to increase FDI in pension sector

Currently, FDI in pension funds is capped at 49 per cent . The government is planning to amend the PFRDA Act, 2013, to increase this limit to 100 per cent . Once the required approvals are secured, the amendment bill is expected to be tabled in Parliament in the coming session.

Key changes proposed for NPS subscribers

The proposed amendment may also include separating the NPS Trust from the Pension Fund Regulatory and Development Authority (PFRDA). At present, the NPS Trust functions under PFRDA oversight. Going forward, it could operate independently either under a charitable trust framework or be governed by the Companies Act.

To ensure autonomy from the regulator, a 15-member board may be constituted to oversee NPS operations. Given that the central and state governments are the largest contributors, most members of this board are expected to be government nominees.

The move appears to follow the model adopted in the insurance sector, where 100 per cent foreign investment is now permitted. Parliament had recently raised the FDI limit in insurance from 74 per cent to 100 per cent , after an earlier increase from 49 per cent to 74 per cent in 2015.

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These changes are aimed at strengthening the pension ecosystem. The PFRDA was set up to ensure structured growth and effective regulation of the pension sector. Separating the NPS Trust is expected to enhance transparency, improve efficiency, and provide greater operational independence.

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The NPS was introduced on January 1, 2004, for central government employees (excluding the armed forces) to reduce the financial burden of the old pension scheme. It was later opened to the general public in 2009. Through these reforms, the government aims to improve fund management and enable better utilisation of pension funds for national development.