India’s pension saturation too low; there is huge scope for growth: PFRDA

Regulator proposes special body for pension advocacy

Some 75% of the total pension investment can be put in equity which offers higher returns and at the same time, it also comes with some risk, says Supratim Bandyopadhyay. | Photo Credit: KAMAL NARANG

The Pension Fund Regulatory and Development Authority (PFRDA) on Friday said India’s pension saturation was too low at about 15% of the country’s GDP, while it was 100% or even 200% for many developed countries.

The market share of pensions as a percentage of the gross domestic product (GDP) was significant in countries such as Japan, Norway, the U.S. and therefore, in India there was a huge potential for pension- market growth in the coming years, said PFRDA Chairman Supratim Bandyopadhyay.

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However, he said the non-government pension sector witnessed an annual growth of 65% in March over the previous year, and the segment was expected to grow significantly in the current fiscal as well.

The non-government space currently had total of assets under management worth ₹1.23 lakh crore and this was expected to cross ₹2 lakh crore by March 2023, he forecast.

“There are 55 lakh active customers in the non-government sector and 20 lakh new customers are expected to be added this year,’‘ he said. Equity brought better returns, and high risk alike

Equity-linked plans offered the highest returns at 12.12% followed by Central government schemes (at 9.43%) and State government schemes (at 9.29%).

“Some 75% of the total pension investment can be put in equity which offers higher returns and at the same time, it also comes with some risk,’‘ Mr. Bandyopadhyay explained.

To mitigate the risk involved, PFRDA is currently in the process of developing a new Minimum Assured Return Scheme, which is expected to be available in the market by the end of September.

The body has also proposed an amendment of PFRDA Act and also mooted the formation of a special body for pension advocacy in line with AMFI and Insurance Council.

Addressing a media conference here on Friday, Mr. Bandyopadhyay further said, the country’s pension assets stood at ₹35 lakh crore as on March with Employees Provident Fund Organisation alone accounting for 41% of it at ₹14,46,320 crore and insurance contributing another 30% with more than ₹10 lakh crore.