The Pension Fund Regulatory Development Authority (PFRDA) has revised the valuation guidelines under NPS schemes and other Pension schemes administered by it. The NPS Trust and Pension Funds have been asked to ensure necessary mechanism for implementation of the revised guidelines from January 1, 2020. In a circular dated November 21, 2019, PFRDA said: “These guidelines shall supersede earlier guidelines/instructions issued in this
regard and may be effectively implemented from 1st December, 2019, however, if necessary software developments at the Pension Fund and Valuation Agency end requires some more time, it should be ensured that guidelines are implemented latest by 1st January, 2020.”
PFRDA issues guidelines from time to time to regulate the securities held in the name of the NPS Trust and managed by Pension Funds as per Regulation 15 of the PFRDA (Pension Fund) Regulations, 2015. Through valuation of securities at the day end, Pension Funds “arrive at the scheme-wise Net Asset Value (NAV) at which subscriber transactions such as purchase/redemption/switch of units are undertaken.”
PFRDA said that Valuation Policy guidelines, 2019 shall apply to all investments made under National Pension System (NPS) and other schemes approved/administered by PFRDA and managed by Pension Funds.
PFRDA said, “The valuation of investments shall be based on the principles of fair valuation i.e. valuation shall be reflective of the realizable value of the securities/assets. The valuation shall be done in good faith and in true and fair manner through appropriate valuation policies and procedures.”The guidelines provide for various methodologies with which different asset classes shall ve valued. Here’s a look at some of them:
Mutual Fund Units – Valued at latest NAV available on AMFI website. Presently, previous day’s Scheme NAVs are being considered as Fund houses declare NAV at 9:00 pm and PFs declare it at 8:00 pm.
Valuation of Bank Fixed Deposits – To be valued at face value and amortized on a straight-line basis.
Government Securities with residual maturity of more than 30 days – The security will be valued based on scrip level prices released by the valuation agency on the same basis as debt securities maturing greater than 30 days.
Government Securities with residual maturity of up to 30 days – The security will be valued through amortization on the same basis as debt securities maturing up to 30 days.
Index Funds – Valued at latest NAV available on AMFI website. Presently, previous day’s Scheme NAVs are being considered as Mutual Fund houses declare NAV at 9:00 pm and PFs cut off time for NAV declaration is 8:00 pm.
Exchange Traded Funds – As per the closing price of the day of the respective stock exchange.Securities traded on valuation day – As per closing price of the Principal Stock Exchange. In case, it was not traded on principal stock exchange then the closing price of the secondary stock exchange.
Securities not traded on valuation day – When a security is not traded on any stock exchange on a particular valuation day, the value at which it was traded on the principal stock exchange or secondary stock exchange, as the case may be, on the earliest previous day may be used provided such date is not more than 30 days prior to valuation date.