Change in Investment Pattern for Non-Govt PFs, Gratuity Funds

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The revised investment pattern has been finalised by the government and will be notified shortly. The key concentration of the Trustees and the need for the exercise of due diligence by them and provides sound and objective criteria to them to select any financial instrument.

The new investment pattern intends to provide greater flexibility by providing wider variety of financial instruments as well as greater freedom to manage the portfolio, in terms of newer instruments and greater flexibility in investment limits.

Change in Investment Pattern for Non-Govt PFs, Gratuity Funds

The changes suggested in the new investment pattern, with effect from 1st April, 2015.

  • The new pattern provides minimum and maximum limits for Central Government Securities, State Government Securities, Government Guaranteed Securities (with a separate maximum limit of not in excess of 10%) and units of gilt Mutual Funds, forming part of a single category.
  • It will allow investment up to 50% of the investible funds, instead of 55% under the earlier Investment Pattern of 2008.
  • Provides minimum investment ceiling for the categories of (a) Government Securities, (b) debt securities and (c) the equity and equity related instruments.
  • Introducing new category of instruments, such as, Index Funds, Exchange Traded Funds, debt mutual funds and asset backed securities and instruments, such as, the infrastructure debt funds, real estate investment trusts, Infrastructure Investment.
  • Now, investment is allowed in term deposit receipts of even less than one year duration issued by scheduled commercial banks subject to the specified financial criteria.
  • Under, equity and equity related instruments, prescribing investment of minimum 5% and up to 15% of the investible funds.
  • Considering the protection of interests of subscribers, strengthening credit rating requirements for some financial instruments from "investment grade" to "AA" category.

The new investment pattern would come into force from 1st April, 2015, that is, from the financial year 2015-16. A comparison of Investment Pattern of 2008 and that of 2015 is as below

Instrument Investment Pattern of 2008 Investment Pattern to be notified with effect from April 1, 2015
Government Securities upto 55% Minimum 45% and upto 50%
Debt Securities and term deposits of banks upto 40% Minimum 35% and upto 45%
Money Market Instruments upto 5% upto 5%
Equity and equity related instruments upto 15% A Minimum of 5% and upto 15%
Exchange Traded Funds/ Index Funds No such Category Exchange Traded Funds, Index Funds and derivatives are part of the a minimum 5% and Upto 15% limit for equity and equity related instruments
Asset Backed Securities, Units of Real Estate / Infrastructure Investment Trusts 0% Upto 5% limit

The investment pattern was last revised on 14thAugust, 2008 and was to be made effective from 1st April, 2009.

Source: PIB 

Read more about: investment, pf, gratuity, pension
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