India mulls allowing bespoke pensions in $175 billion industry

India’s retirement fund regulator will permit individual pension houses to launch tailor-made investment plans in what could be a major overhaul for the $175 billion industry.

Account holders will now be able to operate multiple pension programs, compared with just one earlier, the Pension Fund Regulatory and Development Authority said in a filing Tuesday, which confirmed an earlier Bloomberg News report. The change will help subscribers align their retirement and wealth building goals, PFRDA said.

Even though India’s pensions are growing quickly, pensioners in the country generally have little flexibility in how their savings are invested as the regulator sought to control risks. Typically, managers of funds like SBI Pension Fund Pvt. Ltd. or ICICI Prudential Pension Fund buy securities to match the asset mix of plans predetermined by the PFRDA.


The new proposal will allow pension fund houses to create their own bespoke products catering to a wider range of investor preferences and risk appetite. That would allow the funds to advertise a wider range of potential returns, and target customers more specifically.

At present, pensions under the National Pension System are allowed to invest in four asset classes — equity, debt sold by companies, government bonds and alternative investment funds. The customer can choose from a handful of pre-determined PFRDA plans according to their individual risk appetite.

The filing said subscribers will benefit from an expansion of choice and personalization, while fund managers will be able to offer more innovative products and deepen the market.

The industry in recent years has been increasingly attracting foreign investment through joint ventures. About four years ago, the regulator raised the limit for foreign direct investment to 74% from 49%.