With 38% growth in AUM and 23% in number of subscribers, the awareness around National Pension System is growing under the agile supervision of Pension Fund Regulatory and Development Authority of India (PFRDA). The pension regulator will soon be launching key changes to make it more attractive, expanding its reach across India. These are the 5 key announcements:
- Maximum entry and exit age to be hiked
Currently, people in the age group of 18 to 65 years can join the NPS. The regulator is mulling over hiking it to 70 years. The exit age may also be revised to 75 years from the current 70 years.
- Minimum assured return
Since NPS is a market-linked product investing in equity, government securities and corporate bond, one cannot predict the overall return that one may earn by the retirement. Keeping conservative investors in mind, the pension regulator will soon launch a pension scheme offering minimum assured return to the subscribers.
- Commute the full amount
NPS subscribers can commute 60% of their investment after retirement, while 40% has to be parked with one of the insurance companies to receive pension. However, those who end up accumulating only up to Rs. 2 lakh by the retirement age are allowed to withdraw the full amount. The PFRDA now considers hiking it to Rs 5 lakh.
- Innovative payout options
The subscribers have to park 40% of their NPS corpus with one of the 12 insurance companies empanelled with the NPS. PFRDA Chairman Supratim Bandyopadhyay acknowledges that the annuity rates have come down drastically – so much so that if one opts for return of purchase price option in annuities, the interest rate varies between 5 and 6%. The regulator is mulling over allowing subscribers to retain 40% with the pension fund managers to earn better return.
- Widening the distribution network
Currently only institutions can get a distribution licence. They are called Point of Presence (POP). “We are expanding the distribution channel. We are exploring if we can have individuals as our distribution partners. However, we do not have wherewithal to hire individual PoPs. Existing POP can recruit them as their sub-entities. Besides, we will soon be rationalising the commission fee for POPs as we did for pension fund managers on fund management fee,” Bandyopadhyay said.