In a major policy initiative aimed at improving transparency and reducing volatility in pension wealth reporting, the Pension Fund Regulatory and Development Authority (PFRDA) has proposed a new ‘dual valuation’ framework for long-term pension investments under the National Pension System (NPS) and Atal Pension Yojana (APY).
The proposal, outlined in a 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)”, seeks to ensure that subscribers’ pension wealth reflects a more stable, long-term picture rather than being swayed by short-term market fluctuations.
According to the PFRDA, the new approach aims to balance transparency, financial stability, and long-term growth for India’s retirement savings ecosystem. “The framework is part of our ongoing commitment to strengthen governance, protect subscriber interests, and contribute to India’s financial infrastructure,” the regulator said in a statement issued on October 21, 2025.
Dual valuation
The paper, dated October 17, proposes introducing two methods of valuation for long-dated government securities-accrual-based and fair market-based.
Accrual-based valuation would present a smoother and more stable view of pension wealth during the long accumulation phase, typically lasting 20-40 years.
Fair market valuation would continue to ensure transparency and compliance with market-linked pricing norms.
By adopting this dual model, PFRDA hopes to achieve three key goals:
Depict stable and simplified pension wealth for subscribers during the accumulation phase.
Reduce the impact of short-term interest rate volatility on Net Asset Value (NAV), since these fluctuations rarely affect subscribers materially in the long run.
Align long-term pension fund investments with infrastructure and capital formation goals, boosting confidence among investors and stakeholders.
Current valuation challenge
At present, NPS investments are marked to market daily, meaning pension fund NAVs fluctuate with every market movement. This makes subscriber wealth appear volatile, even though pension savings are meant for the long term.
“Defined contribution pension plans typically have a long accumulation phase of 20 to 40 years, and valuation methods significantly influence how pension wealth is portrayed to subscribers,” the paper stated.
Currently, all securities-equity, corporate bonds, and government securities-are valued using uniform fair valuation, regardless of maturity or liquidity. However, this approach poses challenges:
Long-dated debt securities are highly sensitive to interest rate changes.
They are less liquid than short-term instruments.
Daily volatility in NAVs may misrepresent actual long-term value, potentially undermining subscriber confidence.
Stakeholder participation
The PFRDA has invited comments from all stakeholders, including existing NPS and APY subscribers, pension fund managers, financial experts, and the general public. Feedback can be submitted via the PFRDA website until November 30, 2025.
Once finalised, the dual valuation framework could mark a significant structural reform in India’s pension sector-making retirement wealth representation clearer, steadier, and better aligned with long-term savings objectives.