What is the story about?
The Pension Fund Regulatory and Development Authority (PFRDA) has released a draft proposal introducing a dual valuation framework for government securities held under the National Pension System (NPS) and Atal Pension Yojana (APY).
Here’s what the draft rules mean for subscribers and pensioners.
What are the draft rules?
Currently, all government securities in NPS/APY are valued daily using the mark-to-market method. This means the Net Asset Value (NAV) of your pension account reflects daily market prices, making your pension wealth appear volatile even though contributions are meant for the long term.
PFRDA’s draft proposes a dual approach:
Accrual/HTM (hold-to-maturity) valuation:
Mark-to-market valuation:
Why this matters for subscribers
Smoother growth of pension wealth: Long-term NPS/APY investors will see less short-term volatility affecting their account, making it easier to track retirement savings.
Better alignment with long-term goals: The approach allows pension funds to focus on productive, long-dated government securities, supporting infrastructure financing and economic growth.
Flexibility for pension funds: Funds can actively manage liquid government securities to optimize returns without disturbing the long-term portfolio stability.
Clearer picture at withdrawal: Subscribers can know exactly what their accumulated pension wealth is at the time of retirement, avoiding surprises from daily market swings.
What happens next?
PFRDA has invited feedback from subscribers, pension funds, experts, and the general public on this draft framework.
Comments can be submitted on or before November 30, 2025 via the PFRDA website.
Bottom Line:
The proposed dual valuation framework is designed to balance transparency and stability, helping subscribers make informed retirement planning decisions while allowing pension funds to invest effectively in government securities.
Here’s what the draft rules mean for subscribers and pensioners.
What are the draft rules?
Currently, all government securities in NPS/APY are valued daily using the mark-to-market method. This means the Net Asset Value (NAV) of your pension account reflects daily market prices, making your pension wealth appear volatile even though contributions are meant for the long term.
PFRDA’s draft proposes a dual approach:
Accrual/HTM (hold-to-maturity) valuation:
- Interest earned on securities is recognised daily, and premiums or discounts are amortized over time.
- Daily price swings due to interest rate changes are largely ignored, stabilizing NAVs.
- Helps subscribers see a smoother, more consistent accumulation of their pension wealth over decades.
Mark-to-market valuation:
- Securities are valued as if liquidated in the current market.
- Reflects real-time market conditions and ensures transparency for withdrawals or pension payouts.
- Keeps subscribers informed about the actual market value of their investments.
Why this matters for subscribers
Smoother growth of pension wealth: Long-term NPS/APY investors will see less short-term volatility affecting their account, making it easier to track retirement savings.
Better alignment with long-term goals: The approach allows pension funds to focus on productive, long-dated government securities, supporting infrastructure financing and economic growth.
Flexibility for pension funds: Funds can actively manage liquid government securities to optimize returns without disturbing the long-term portfolio stability.
Clearer picture at withdrawal: Subscribers can know exactly what their accumulated pension wealth is at the time of retirement, avoiding surprises from daily market swings.
What happens next?
PFRDA has invited feedback from subscribers, pension funds, experts, and the general public on this draft framework.
Comments can be submitted on or before November 30, 2025 via the PFRDA website.
Bottom Line:
The proposed dual valuation framework is designed to balance transparency and stability, helping subscribers make informed retirement planning decisions while allowing pension funds to invest effectively in government securities.
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