Flexibility on frequency of switches to help subscribers ride market trends: PFRDA
You as an NPS subscriber may soon be allowed to switch your asset allocations of your National Pension System (NPS) funds for as many as four times in a year. This is against the current norm of maximum of two switches allowed in a year, PFRDA Chairman Supratim Bandyopadhyay said on Tuesday.
There have been lot of requests from NPS subscribers to increase the frequency of switches and therefore this is being contemplated, Bandyopadhyay said replying to a query at an Assocham organised webinar on ‘National Pension System for corporates’.
So what this would mean is that looking at market trends when next time Nifty50 say falls 10 per cent suddenly and NPS subscribers want to increase their equity allocation, they could go ahead and do so taking advantage of the higher cap on switches. Similarity, if interest rates in the economy were to increase, then NPS subscribers can do a switch to increase their debt allocation, the PFRDA Chairman explained. He also said the additional two switches too will come free of cost to the NPS subscribers.
India’s pension assets under management have crossed ₹6.8 lakh crore, growing at a compounded annual growth rate of about 30 per cent.
At the same time, Bandyopadhyay cautioned NPS subscribers to not treat NPS like a mutual fund and advised them to “use the switches judiciously”. “People mix it up with mutual funds. You must treat it as pension corpus being built for retirement needs. You will have to give some time and use it judiciously. But we are going to increase it (switches) to 4 times,” he added.
In talks with IRDAI
Meanwhile, Bandyopadhyay also said that PFRDA is in talks with insurance regulator IRDAI to enable annuity service providers to introduce “variable annuity” products —to give cushion against rising inflation — in the market at the earliest.
“We are making lot of changes. We are learning from situations. Even recently looking at increase in longevity of Indians, we had increased maximum entry age for NPS to 70 years from 65 years and allowed NPS subscribers to continue with NPS up to 75 years”.
In the four months since the entry age norm was relaxed, as many as 1,200 people in the 66-70 years age have opted for NPS, he added.
Bandyopadhyay highlighted that NPS is not only a retirement solution, but during the accumulation phase it also provides a competitive return. He noted that Equity funds have since 2009 given a compounded return of 12.8 per cent, while the debt category gave return of 9.86 per cent and G-sec yielded return of 9.4 per cent.
Bandyopadhyay urged corporates to “handhold” their employees in subscribing to the NPS.
“Corporates have big and important role to play. A word from employer will go a long way in employees joining the NPS. We have breadth but don’t have the depth (in corporate NPS)”, he said.
So far, 9600 companies have registered with NPS and 13 lakh employees have opted for NPS through this route. In all, there are 4.8 crore customers (mostly government and public sector employees) of NPS and other schemes in the country.