The proposal to allow pension funds to invest up to 30 per cent of their corpus in overseas financial instruments might be introduced in phases, finance ministry sources said on Thursday.

The details will be worked out by the Pension Fund Regulatory and Development Authority. One suggestion is to set a limit of 10 per cent to start with.

The sources said there could be separate limits for allocations to foreign debt and equity instruments. Graduated investment is a global best practice.

At present, no provident fund, including the Employees Provident Fund, gratuity or superannuation fund is allowed to invest in overseas markets. The objective of allowing these funds to invest overseas is to help them diversify their portfolios and reduce volatility in returns.

The government had initially planned to restrict the number of fund managers to six. It has now decided to do away with this limit.