Supratim Bandyopadhyay, Chairman, Pension Fund Regulatory and Development Authority (PFRDA), revealed in an interview to Mint that the ceiling on equity under NPS (National Pension System) Tier II will be raised to 100% after getting the board’s approval. will be done. Those opting for 75% equity even in Tier I (active option) will not have to reduce their equity component after crossing the age of 50 years. Edited part.
What is the progress made by NPS in the last one year?
At the beginning of the year, we were talking about a certain number (1 million new customers added) and we are close to that, although it all depends on the performance in March. There are at least 8.3 lakh new subscribers of NPS this year. Last year the highest was 5.9 lakh. So, in a particular year when we have seen two waves of COVID-19, I believe Points of Presence (PoPs) have done an amazing job of reaching out to people. They have created their own mobile apps and online channels which are doing quite well as many people would have preferred to avoid visiting the bank branch or POP office during this period.
Late last year, the PFRDA issued rules for individuals to enroll themselves as agents of POPs. Has there been much progress in this area?
Individual agents will not be listed by us directly. They will be listed by the POP under a simple format where they will have an agreement on how the revenue will be shared. Insurance agents and mutual fund distributors are the individuals who will be empaneled as they are already selling financial products. Keeping these people in mind, we have increased our POP charges. They have to pay a little more to be attracted as these charges are nothing compared to insurance commission or mutual fund distribution charges.
Does PFRDA have plans for a regulatory sandbox? There have been cases of startups entering the pension sector of late.
We are giving some guidelines but we are also talking to some of our POPs to come up with some new ideas to work in that sandbox environment. But so far we haven’t found anything worthwhile.
What about new pension fund managers? For example, you have received an application from Axis AMC.
We approved the application of Axis long back, but Axis Bank has started Axis AMC (Asset Management Company) and Axis AMC is going to be the prime promoter here. Therefore, they had to seek the approval of their primary regulator, the primary regulator of Axis Bank, the RBI. So, it took some time. Now, all the approvals are in place. Hence, they hope to form a pension fund management company by April. As far as the other two, those promoted by Tata AMC and Max Life Insurance are concerned, the approval was given a little later. I believe they are working on a war footing and so we can see their pension fund managers in the next two to three months.
Is there any plan to remove 75% equity cap, especially in NPS Tier II?
Our Pension Advisory Committee has agreed to this, but like the mutual fund industry, they wanted us to develop some kind of risk-o-meter, which shows how much risk you are taking with a particular product . Hence, the Risk-O-Meter has been developed with the help of NPS Trust and CRISIL and we are taking it to the board. Hence, once they approve it, the 75% limit in Tier II will be increased to 100% as it is an optional account. In Tier I also we are going to bring a small change. We have 75% active options in equities but there is a small bet. Once you cross the age of 50, your equity component will have to come down. We are removing the limit for such subscribers also.
PFRDA has empaneled a consulting firm for Minimum Guaranteed Pension/Minimum Assured Return Scheme. Any progress on this?
We just listed them and I had a round of discussions with them to talk about what kind of guarantees can be given. We have to keep two things in mind. One, what is guaranteed should attract people. Secondly, it should be something that the pension fund manager can also manage. I cannot give full guarantee and say that whatever happens, I will give you 10% return. This is impossible under the kind of volatility we see in the market. The consulting firm will design the product.
A fluctuating guarantee, say, benchmarked, a T-bill or a one-year government security might be a better way to do it. It will be reset from time to time and will not be fixed for the entire tenure. Hence, the consulting firm will come out with the product and after that, our committee comprising of pension advisory committee as well as internal members and external actuaries will provide guidance on what is acceptable.
Don’t miss a story! Stay connected and informed with Mint.
download
Our App Now!!