The PFRDA is giving final touches to the assured return investment plan under the National Pension System (NPS) architecture, while keeping the option open to offer a fixed minimum return or benchmark it to a real-time rate, a top official has said.
The Pension Fund Regulatory and Development Authority is most likely to give the final shape to the product by the end of this month. However, the launching may take another few months, PFRDA Chairperson Supratim Bandyopadhyay said.
"We had two-three rounds of discussions with the pension fund managers, the EY team along with our expert committee members. We have given some kind of a shape to that [product], mostly the final shape will be done by the end of September. The launch will take some time because it requires a lot of system-related developments as it is a new kind of scheme altogether," Mr. Bandyopadhyay told PTI in an interview.
As the name suggests, the scheme intends to offer a minimum guaranteed return to investors. However, the regulator has not yet decided on the quantum.
"We are keeping that option open. It could be either a sort of a fixed return of x percentage or it could be related to a real-time benchmark, say the one-year treasury bill or something like that. So, both things are open," he said.
Over 10% return
Over a period of 13 years, the PFRDA has given an average return of more than 10% on the pension schemes investment.
Mr. Bandyopadhyay said, "We will try to bring in the scheme within this fiscal year. There is an interest in the market for this kind of scheme product and it will give visibility to the existing scheme ... markets are always volatile. Maybe two years back it was COVID, tomorrow it can be something else." In a volatile market, giving some kind of guarantee was also challenging but despite that PFRDA aimed to offer its subscribers this kind of product, he said.
Countering the question as to why one should choose for assured return if in normal course it was delivering over 10% rate, he explained there were different patterns in investment behaviour of the people.
Many people in the higher bracket of age may think that they have reached a stage not worth taking a risk in a volatile market.
The average of over 10% delivered in the past over a decade can go down as well as market-linked returns offer no guarantee, so the proposition for assured return may be promising to the investors.
The PFRDA offers two flagship pension schemes — NPS and APY. While the NPS caters to the employees in the organised sector, including the Central and State governments, the Atal Pension Yojana (APY) fulfils the pension needs of those working in the unorganised sector of the country which accounts for the bulk of employment generation in the country.