NRIs, Residents Can Now Build a USD Retirement Corpus at GIFT IFSC You may soon be able to build your retirement nest egg in dollars and invest it across global markets, all from India’s offshore financial hub. The International Financial Services Centres Authority (IFSCA) is set to roll out a new pension framework at GIFT IFSC that will allow NRIs, PIOs and even resident Indians (via LRS) to invest in globally diversified, USD-denominated retirement products. In an interaction with Thefynprint, Mahipal Shetty, Executive Director at IFSCA, explains how the new regime will work, who can launch products, what investment flexibility fund managers will have.
Q: What new pension framework is being introduced at GIFT IFSC? A: With the new pension fund regulations, which have been approved by the IFSCA Board and are awaiting Gazette notification, pension will become a distinct and strong pillar within IFSC.
Given the long-term nature of retirement savings, pensions naturally complement the other three verticals.
Q: How will the structure work? A: Pension Fund Manager (PFM) will manage the scheme. Individuals will be subscribers and participation is voluntary. Eligible subscribers include Non-Resident Indians (NRIs), Persons of Indian Origin (PIOs), and resident Indians investing under the LRS route. Q: Will there be separate pension plans for NRIs/PIOs and resident Indians? A: Yes, products will be different. All schemes will be USD-denominated, not INR. They are not meant to compete with domestic pension products but to complement them. There will be separate schemes depending on what each Pension Fund Manager proposes and gets approved under the regulatory framework. Q: Who can launch these pension offerings and what are the eligibility criteria? A: Only entities registered under IFSCA’s dedicated pension regulations will be allowed to launch these products. These rules are separate from the existing Fund Management Entity (FME) framework and are awaiting formal notification. To qualify, an applicant must have a minimum net worth of USD 1 million, which must be maintained at all times. In addition, the entity should have at least 10 years of experience in pensions or related areas such as life insurance annuity products, retirement-focused financial services, or similar long-term investment businesses. The idea is to ensure that only experienced and credible players manage what is essentially a long-term retirement product, especially in the initial phase.
Q:What about existing FME licence holders who already meet the net worth requirement? A: The USD 1 million requirement must be earmarked specifically for the pension fund activity. Within the same legal entity, pension can be undertaken as an additional activity. However, operations must be ring-fenced. That means separate staff and clear operational separation for the pension business. Separate physical space is not mandatory, but functional segregation is.
Q: How will contributions work under this pension plan? Are there any minimum or maximum limits? A: The regulations do not set any fixed minimum or maximum contribution amounts. Since the scheme is voluntary, IFSCA has chosen not to be overly prescriptive. Instead, pension fund managers will decide the contribution structure based on their target investors, whether NRIs, PIOs or resident Indians, and lay it out in their Scheme Information Documents (SIDs). IFSCA will review these to ensure basic prudential safeguards and investor protection.
Q: Where can these pension funds invest, and how does this differ from NPS? A: Equity exposure can go up to 100% of the portfolio. Within equities, there will be sub-limits across large-cap, mid-cap and small-cap segments to manage risk, especially in the early phase. For global equity exposure, up to 100% is allowed, with geographical caps, up to 50% in the US as the largest investable market, and lower caps for other geographies, typically around 20% per country.
Debt exposure can also go up to 100% if a fund manager chooses a debt-only strategy. Alternatives, such as private equity, venture capital, REITs and commodities, are permitted up to 15% of the overall portfolio. Within that 15%, no single alternative asset class can exceed 5%. This means fund managers can design 100% equity schemes, 100% global schemes, or 100% debt schemes, subject to prudential caps on alternatives and geography. Q: Can investors decide their own equity and debt allocation, like in NPS? A: It will depend on how each pension fund manager designs its scheme. Some may offer multiple allocation choices, while others may run a single investment strategy.
Q: What is the vesting and withdrawal framework? A: The vesting period is 10 years. Subscriber then becomes eligible for withdrawal. There is also a six-year reference in the regulations as a normal post-vesting period, depending on how the scheme is structured. The maximum continuation age is 75 years, with or without continued contributions. At or after vesting, the subscriber must opt for a Systematic Withdrawal Plan (SWP). Broadly, around 80% of the corpus is intended to be drawn down through SWP, while up to 20% may typically be taken as lump sum, subject to the scheme structure. Q: Will subscribers have the option to buy an annuity? A: Not for now. The pension product will offer payouts only through a Systematic Withdrawal Plan (SWP). In India, life insurers can currently only offer annuities under existing laws. Allowing pension fund managers at IFSC to provide annuities would require legal changes, which are not yet in place. Q: Will the same pension scheme apply to both residents and NRIs? Can the money be invested in India and abroad? A: No, there will be separate schemes for residents and NRIs/PIOs. Their funds cannot be mixed, mainly for regulatory and compliance reasons. A resident-focused scheme will typically invest outside India, in line with the Liberalised Remittance Scheme (LRS) and IFSC’s offshore nature. An NRI scheme, on the other hand, can invest in both Indian and global markets, subject to limits. If a subscriber’s residency status changes, they can continue in the system, but their investments may need to be shifted to the appropriate scheme. Portability is also planned. Investors will be able to move their corpus from an IFSC pension product to the National Pension System (NPS). The reverse move, from NPS to IFSC, is being considered, though the details are still evolving
Q: What about taxation during accumulation and withdrawal? A: Taxation is not yet finalised. We are proposing that IFSC pensions receive treatment similar to NPS or long-term mutual fund investments. However, the final decision rests with the Government and revenue authorities.
Q: Is there any health insurance feature linked to the pension product? A: Yes. One distinctive feature is an optional health add-on benefit. Subscribers may opt for health coverage that can be triggered in situations such as critical illness or extreme medical emergencies. PFRDA has since introduced a similar concept domestically in its sandbox framework. Source:https://thefynprint.com/nps/nris-residents-can-now-build-usd-retirement-corpus?id=69ac603331 e3de47ab7276e7
