PFRDA introduces new initiatives and features for NPS Subscribers

Pension Fund Regulatory and Development Authority (PFRDA) has been established by the Government of India for regulation and development of Pension Sector in order to protect the old age income security of subscribers. PFRDA takes various initiatives from time to time in order to simplify and improve the operational issues in National Pension System (NPS). PFRDA has taken number of initiatives for subscribers which will give freedom to choose from various available options to plan their NPS account.

PFRDA has planned to introduce a few new features particularly for NPS subscribers. The planned features include Asset Class for Alternate Investment Funds (AIF). It can be opted by subscriber by choosing the select asset class as per the individual discretion. New assets class will consist of commercial mortgage based securities or residential mortgaged based securities, units issued by Real Estate Investment Trusts, asset backed securities, units of Infrastructure Investment Trusts regulated by the Securities and Exchange Board of India, alternative Investment funds (AIF Category I & II) registered with SEBI.

Introduction of two additional life cycle funds to NPS Private Sector subscribers is under process in addition to the existing life cycle fund (available under default mode). These Life Cycle Funds may be called as “Aggressive Life Cycle Fund” with equity allocation of 75% at the age of 35 years and “Conservative Life Cycle Fund” with equity allocation of 25% at the age of 35 years.

It is also proposed that LC-50 (Moderate Life Cycle Fund) and LC-25 (Conservative Life Cycle Fund) will also be made available to the Government employee along with the other options. The matter for the same is under consultation with various ministries, wherein the proposals have been initiated and responses on the same are still awaited.

Proposal to provide choice to Government employees on the following outline is under process and in continuous consultation with the various ministries and Government. The simple choice will be made available to the Government employee (existing/new/joining after an agreed date), through these four schemes:

a) Moderate Life Cycle fund LC-50 with maximum exposure to equity capped at 50%

b) Conservative Life Cycle fund LC-25 with maximum exposure to equity capped at 25%;

c) Scheme G, where 100% of the funds shall be invested in Govt Securities.

d) Existing choice of CG/SG scheme being the default scheme for both existing and new subscribers

e) The Govt. subscribers shall be allowed the option of all pension funds including Private sector Pension Funds. However, a combination of the Public Sector of Pension Funds ( 2 or 3) depending upon how many get selected in fresh selection process, will be available as the default option for both existing and new subscribers.

The existing allocated funds before the pre-decided date shall continue to remain with existing Pension funds and Schemes .The above choices shall apply to incremental flows for existing subscribers from a date decided by the Authority.

Choice of Pension Fund will dilute the restrictions of deployment of funds of Central Government employees across the three Public Sector PFs only and shall bring parity with the private sector NPS subscribers to enable them to choose pension fund across the all pension funds. This would not only provide platform to choose PFs (as per the performance) according to the choice of subscribers but also fulfil the mandate of PFRDA Act which provides for choice of the pension funds under Section 20(20).

Choice of investment pattern, wherein the Govt. employees will be provided with the active choice to invest in various asset class will also enable subscriber to move from Directed Investment Regime to Prudential Investor Regime.

Apart from that, with a view to expand the coverage under old age income security/pension to the workers/employees engaged in informal sector, India may also consider adopting soft compulsion, generally known as automatic enrolment for employees and workers in private sector, government, semi-government organizations like Micro Industries, SSI units, Anganwadi, Asha workers, Construction Boards, Gram Panchayats, NGOs SHGs, etc. in APY.

Enterprises which could be sole proprietorship, partnership etc. with less than 20 employees will be required to automatically enroll all their full-time employees into APY. Employer contribution towards the pension will be voluntary. The employee will be given option to opt out of the system any time after one year following automatic enrolment.

As of September 6, 2016, NPS and APY together have 1.34 crore subscribers with total Asset under Management (AUM) of 1.45 lakh crore.

The following added information may be of use to media:

Atal Pension Yojana

1. More than 33.5 lacs subscribers have been enrolled under APY Scheme till date.

2. At present, there are 374 Atal Pension Yojana service providers i.e. Banks and India Post registered in the system. More than 1.47 lakhs branches and post offices are involved as distribution channels for promoting APY.

3. Banks are allowed to extend APY product through net banking platform to their account holders.

4. PFRDA has released the Co-contribution under APY in tune of Rs 100 cr for the FY 2015-16 to all the eligible subscribers

5. Government of Himachal Pradesh, Andhra Pradesh and Gujarat are agreed to associate with APY scheme and also agreed to give co-contribution to the eligible subscribers in the state.

6. PFRDA had conducted the capacity building workshop under APY in large scale and trained more than 1 lacs bank and post office official across the country in span of 8 to 9 months