PFRDA plans to launch a guaranteed-return scheme in September 2022

Regulator looks to give three pension fund choices for each asset class in non-govt sector

The Pension Fund Regulatory and Development Authority (PFRDA), which operates the National Pension System (NPS), is planning to launch a guaranteed-return scheme in September this year. The pension regulator is also looking at giving choices of three different pension funds for each asset class in the non-government sector.

At an event in Mumbai, Supratim Bandyopadhyay, chairman of the PFRDA, said: “For minimum assured return scheme, the work is going on smoothly, and hopefully by September end, it will take the final shape. We have a group of actuaries, which are part of the pension advisory committee (PAC), working with our consultant (E&Y). So it’s going quite well.”

Currently, under the NPS, investors can choose between equity, corporate bonds, government securities, and alternative assets. An NPS subscriber has the freedom to allocate his/her contributions to different asset classes through active choice or auto choice.

Under auto choice, the fund of the subscriber gets invested across three asset classes (equity, corporate bonds & government securities) in a predetermined proportion, based on the age of the subscriber. While in active choice, investors can invest in equity up to a maximum of 75 per cent, in corporate bonds and government securities up to a maximum of 100 per cent each, and in alternate assets up to a maximum of 5 per cent.

Officials in the PFRDA stated that investors will be given an option to choose the minimum assured returns schemes, wherein they will get assured returns. However, the quantum of returns is not yet disclosed by the regulator.  

The PFRDA is also looking at providing a variety of three different pension funds for each asset class in the non-government sector. “Today what’s happening is that in the non-government sector, one must choose a fund manager for all three asset classes. However, somebody may be strong in equity, while others in some government securities or in corporate bond funds. So, if investors wish, they can mix and match between three different pension funds.”

Currently, the subscriber gets the same pension fund manager for his/her investments. But once this proposal is implemented, subscribers will have a choice to invest in three different pension funds based on their performance.

The data from the PFRDA shows that the NPS and the Atal Pension Yojana (APY) have assets under management (AUM) of Rs 7.39 trillion as on June 4, 2022, against Rs 6.10 trillion in June last year -- growth of around 21 per cent. The subscriber count for the NPS and the APY as on June 4, 2022, stood at 53.36 million, against 42.91 million in June last year.