Why in news?
The Pension Fund Regulatory and Development Authority (PFRDA) has constituted a high‑level Strategic Asset Allocation and Risk Governance (SAARG) Committee to review and modernise the National Pension System’s investment framework. The panel of investment experts was announced in late January 2026 and is tasked with recommending reforms to strengthen returns and risk management for millions of NPS subscribers.
Background
The National Pension System (NPS) is a defined‑contribution retirement scheme introduced by the Government of India in 2004. It is regulated by the PFRDA and is open to all Indian citizens aged 18–70, including Central and State Government employees as well as private sector workers. NPS subscribers contribute regularly to individual accounts, and these contributions are invested by professional fund managers across equity, debt and other asset classes. As financial markets evolve and subscriber numbers grow, the PFRDA periodically revisits its investment guidelines to ensure that portfolios remain diversified, resilient and aligned with international best practices.
Mandate of the SAARG Committee
- Comprehensive review: The committee will examine existing NPS investment guidelines for government and non‑government sectors and benchmark them against global pension systems and the Indian investment landscape. Its aim is to ensure that the NPS architecture supports long‑term wealth creation while protecting subscriber interests.
- Strategic asset allocation: It will recommend an optimal mix of asset classes—including equity, corporate debt, government securities, money‑market instruments and alternative investments—to balance safety, liquidity and returns. The panel is expected to suggest exposure limits and prudential norms for each asset class.
- Diversification and new asset classes: The committee will explore introducing new asset classes such as Infrastructure Investment Trusts (InvITs), Real Estate Investment Trusts (REITs) and Alternative Investment Funds (AIFs) to improve diversification and mitigate geopolitical, macroeconomic and market‑cycle risks.
- Risk management and governance: It will propose robust risk‑management practices covering market, credit, liquidity and operational risks. Recommendations may include asset–liability management frameworks, valuation standards for alternative assets, guidelines for securities lending and borrowing, and measures to enhance portfolio stability and liquidity.
- Performance benchmarking: The committee will review existing benchmarks for evaluating pension fund performance and suggest appropriate indices and methodologies. This will improve accountability and transparency.
- Sustainability and subscriber choice: Recognising global trends, the panel will consider integrating environmental, social and governance (ESG) factors and climate‑transition risks into investment decisions. It will also examine ways to expand subscriber choice through lifecycle and target‑date funds and to balance passive and active investment strategies.
- Timeline and composition: SAARG is chaired by Narayan Ramachandran, former country head of Morgan Stanley India and chairman of TeamLease Services. The committee comprises seasoned professionals from the capital markets, mutual funds and securities law, including Ananth Narayan (former SEBI member), Devina Mehra (founder of First Global), Kalpen Parekh (MD & CEO of DSP Mutual Fund), Prashant Jain (3P Investment Managers), Rajeev Thakkar (PPFAS Asset Management), Raamdeo Agrawal (Motilal Oswal Financial Services), Sankaran Naren (ICICI Prudential AMC), Sumit Agrawal (Regstreet Law Advisors) and Ashok Kumar Soni (Executive Director, PFRDA). The committee has nine months to submit its report.
Significance
- Strengthening retirement security: By modernising the NPS investment framework, the SAARG Committee aims to ensure higher and more stable returns for subscribers while managing risks effectively.
- Aligning with global best practices: The review seeks to benchmark NPS guidelines with leading pension funds worldwide, thereby enhancing India’s pension governance standards.
- Encouraging innovation: Introducing diversified asset classes and integrating sustainability considerations will enable pension funds to tap emerging opportunities and support broader economic goals.
Source: PFRDA Press Release · Business Standard
