The International Financial Services Centres Authority (IFSCA) has released a consultation paper on the proposed IFSCA (Pension Fund) Regulations, 2025. The primary objective is to establish a robust framework for long-term retirement savings within the IFSC, aiming to protect the interests of subscribers and position the IFSC as a global financial hub.
The proposed regulations are designed to be flexible and globally competitive, targeting Non-Resident Indians (NRIs) and foreign citizens. The move follows recommendations from an Expert Committee and key government notifications that designated pension schemes as a ‘financial product’ in the IFSC and exempted the application of Section 25 of the PFRDA Act, 2013.
Stakeholders and the general public are invited to submit comments on the draft regulations by November 25, 2025.
Key Subscriber and Scheme Features
The proposed framework outlines several key features for the new pension schemes:
- Target Audience: Participation is voluntary and open exclusively to Non-Resident Indians (NRIs) and foreign citizens who are 18 years of age or older.
- Contribution Flexibility: Subscribers will have the flexibility to determine the frequency and amount of their contributions (e.g., monthly, quarterly, or lump sum).
- Scheme Types: Pension Fund Managers (PFMs) will be required to offer two primary investment options:
- Active Choice: Allows subscribers to actively choose their asset allocation across different asset classes.
- Auto Choice (Life Cycle Fund): A default option where the asset allocation automatically shifts from aggressive to conservative as the subscriber approaches retirement age.
- Scheme Structure: Each pension scheme offered by a PFM must be constituted as a trust.
- Portability: Subscribers will have the option to port their Pension Account from one PFM to another registered under these regulations.
Investment Framework & Geographic Allocation
A key highlight of the proposal is the flexible and globally-oriented investment mandate:
- Permissible Assets: PFMs can invest pension assets in a wide range of classes, including equities (listed and private), fixed income, real assets (like REITs/InvITs), highly traded commodities, and cash.
- Indian Asset Exposure: Schemes are permitted to invest up to 100% of their Assets Under Management (AUM) in Indian assets.
- Global Diversification:
- For investments in global markets (outside India), the exposure to any single country is capped at 20% of the scheme’s AUM.
- USA Exception: A higher limit is proposed for the United States of America, where investments can be a maximum of 50% of the AUM.
- Equity Allocation: Depending on the nature of the scheme, the total allocation to equities (both Indian and foreign) can be up to 100% of the portfolio.
- Fixed Income: A minimum of 30% of the portfolio must be allocated to sovereign debt and highly-rated public sector bonds.
Withdrawal, Exit, and Benefit Options
The draft regulations provide a modern framework for withdrawals and benefits:
- Vesting (Retirement): A subscriber’s account vests after a minimum of ten years of contribution or upon attaining the age of 60, whichever is earlier.
- Retirement Options: Upon vesting, subscribers have several options:
- Systematic Withdrawal Plan (SWP): Withdraw the corpus in periodic instalments.
- Annuity: Utilize the corpus to purchase an annuity.
- Combination: Opt for a mix of both SWP and annuity.
- Deferral: Defer the withdrawal of the accumulated corpus up to age 75.
- Minimum Requirement: At retirement, a minimum of 20% of the total corpus must be used to purchase an SWP or annuity (or a combination).
- Early Exit: If a subscriber exits the scheme before the vesting period, a minimum of 25% of the total corpus must be utilized for an SWP or annuity.
- Partial Withdrawal: After a 5-year lock-in period, limited partial withdrawals (up to 75% of the subscriber’s contribution) are permitted for specific purposes such as higher education, critical illness, or housing.
- Healthcare Benefit Option: PFMs may offer a separate “Healthcare Sub-Account” where subscribers can allocate a portion of their contributions (max 5%) to be invested in low-risk, liquid assets for healthcare expenses.
- In Case of Death: The entire accumulated corpus will be paid as a lump sum to the nominee(s) or legal heir(s).
You can access the full consultation paper and comment format here.
Disclaimer: The information published in the above newsletter is collected from various sources in electronic medium and analyzed by the firm. The reader is advised to consult the attorney qualified in their jurisdiction, before acting on any information contained in this newsletter. India Juris excepts no liability what so ever in this regard.
