NATIONAL PENSION SYSTEM
News-CRUX-10
19th July 2023
Context: Pension Fund Regulatory & Development Authority (PFRDA) would allow pension
funds to invest in sovereign green bonds when issued.
funds to invest in sovereign green bonds when issued.
- Currently, there are 10 pension fund managers that manage funds under the National Pension System.
- It is a voluntary, defined contribution retirement savings scheme designed to enable the subscribers to make optimum decisions regarding their future through systematic savings during their working life.
- It was launched in January 2004 for government employees.
- However, in 2009, it was opened to all sections.
- The scheme allows subscribers to contribute regularly in a pension account during their working life.
- On retirement, subscribers can withdraw a part of the corpus in a lump sum and use the remaining corpus to buy an annuity to secure a regular income after retirement.
- This system is managed by PFRDA (Pension Fund Regulatory and Development Authority).
- Green Bonds: These are like any other debt instrument except for the fact that the issuer of the green bond pledges to use its proceeds to finance projects that will have a positive impact on the climate and environment.
- Different from standard bonds: Standard bonds proceeds can be used for various purposes as per the choice of the issuer, whereas proceeds of green bonds are earmarked for green projects or projects that benefit the environment.
- Issuer: Green bonds can be issued by countries, companies and multilateral organisations to only fund projects that have positive impacts on the climate and environment and provide investors with fixed income payments.
- Budget 2022-23: The Finance Minister in the Budget 2022 announced that the government proposes to issue sovereign green bonds to mobilise resources for green infrastructure.
