PFRDA Issues Consultation Paper to Align Valuation Guidelines for Pension Funds with Long-Term Objectives

The Pension Fund Regulatory and Development Authority (PFRDA) has released a detailed Consultation Paper titled "Alignment of Valuation Guidelines with the Core Objectives of Long-only Funds when Investing in Government Securities and Calculation of Net Asset Value (NAV)". Dated October 17, 2025, the paper underscores PFRDA's commitment to enhancing governance, strengthening transparency, and safeguarding subscriber interests under the National Pension System (NPS) and Atal Pension Yojana (APY).

Strengthening Long-Term Pension Fund Stability

The proposed framework marks a significant step in refining how pension fund investments—particularly in long-dated Government Securities (G-Secs)—are valued. PFRDA's aim is to ensure a fair, transparent, and stable representation of subscriber wealth during the accumulation phase, while minimizing short-term fluctuations that may not reflect the true long-term performance of the funds.

The Authority proposes the introduction of a dual valuation framework—comprising both "accrual" and "fair market" valuation approaches—for Government Securities held under NPS and APY portfolios. This dual system is designed to achieve three major objectives:

1. Ensure stable pension wealth representation: By using an accrual-based valuation for long-dated securities, subscribers will see a smoother, more stable accumulation trajectory in their pension wealth, unaffected by short-term market movements.

2. Reduce interest rate volatility impact: The framework seeks to minimize the short-term volatility in scheme NAV arising from temporary fluctuations in interest rates, recognizing that such movements have limited long-term impact on subscribers during their accumulation phase.

3. Support long-term capital formation: By aligning pension fund investments with long-duration infrastructure and development assets, the proposal will encourage greater funding for long-gestation projects, supporting India's economic growth and infrastructure expansion.

According to the Authority, the ultimate goal is to enhance the economic relevance of pension wealth, ensuring that it serves both the financial security of subscribers and the nation's long-term development objectives.

A Step Toward Global Best Practices

The move reflects PFRDA's ongoing efforts to bring India's pension investment framework in line with international best practices for long-term savings vehicles. In global pension systems, long-only funds—such as those managing retirement and social security contributions—often adopt a dual valuation or smoothing mechanism to present a more accurate picture of long-term fund performance, while reducing reactionary volatility caused by short-term market movements.

Such an approach is particularly relevant for schemes like the National Pension System (NPS), where subscribers' funds are typically invested for decades. The framework will allow pension fund managers to value long-term assets more predictably, contributing to better risk management and fund governance.

Enhancing Subscriber Confidence and Transparency

Through this proposed alignment, PFRDA aims to boost subscriber confidence by ensuring that pension account values accurately reflect underlying long-term asset performance, rather than being unduly influenced by transient market conditions.

It will also promote greater transparency and consistency in how Net Asset Values (NAVs) are calculated across pension funds, helping subscribers make more informed decisions about their retirement savings.

By mitigating abrupt NAV changes due to short-term rate volatility, the Authority expects the move to encourage more participation in pension schemes, especially among younger, long-term investors who may otherwise be deterred by market-linked uncertainty.

Invitation for Public and Industry Feedback

PFRDA has invited comprehensive stakeholder feedback on the consultation paper from NPS subscribers, pension fund managers, financial institutions, policymakers, academics, and the general public. The consultation paper is available for review on the official PFRDA website under the "Research and Publication" section: https://pfrda.org.in/en/web/pfrda/consultation-papers.

The Authority has urged all stakeholders to submit their comments, suggestions, and insights by November 30, 2025, ensuring that the final framework reflects a balanced consensus between regulatory prudence and market practicality.

"This initiative is a part of PFRDA's continued commitment to protecting subscriber interests and ensuring India's pension sector contributes meaningfully to the nation's financial and infrastructural growth," the Authority stated.

PFRDA's Broader Vision

The consultation follows a series of policy reforms and initiatives introduced by PFRDA over the past few years aimed at deepening pension coverage, strengthening fund governance, and improving financial literacy among subscribers.

In 2025 alone, the Authority has made notable progress in areas such as digital onboarding for NPS subscribers, standardized disclosure norms for pension funds, and risk-based supervision frameworks for fund managers.

The latest consultation paper adds another layer to this evolving reform agenda—seeking to stabilize long-term pension fund performance while mobilizing capital for India's infrastructure development.

Toward a Future-Ready Pension System

With India's pension assets under management now exceeding ₹12 trillion, reforms that ensure sustainability, stability, and transparency are vital to building trust among contributors. The proposed valuation framework represents a forward-looking step in shaping a resilient and globally competitive pension ecosystem.

By aligning regulatory practices with the long-term nature of pension investments, PFRDA continues to position itself as a progressive and responsive regulator, ensuring that India's retirement systems remain robust, fair, and growth-oriented.