PFRDA completes guaranteed-return investment scheme under NPS architecture while retaining option to offer fixed minimum return or compare to open real-time rate, senior official said responsible.
The Pension Funds Regulatory and Development Authority is expected to finalize the product by the end of this month. However, the launch could take a few more months, said PFRDA Chairman Supratim Bandyopadhyay.
“We’ve had a couple of rounds of discussions with the pension fund managers, the EY team and our expert panel members. We’ve kind of shaped this (product), most of the The final shape will be made by the end of September. The launch will take some time as it requires a lot of system-related development as it is a brand new type of system,” Bandyopadhyay told PTI in an interview.
As the name suggests, the scheme aims to provide a guaranteed minimum return to investors. However, the regulator has not yet decided on the quantum.
“We’re keeping that option open. It could either be some sort of x percentage fixed return, or it could be tied to a real-time benchmark, say the one-year treasury or something. So, both things are open,” he said.
Over a 13-year period, the PFRDA has generated an average return of over 10% on pension plan investment.
Bandyopadhyay pointed out that the structure of the program will be ready more or less at the end of September, but it will take a few more months for the final launch.
“We will try to introduce the program during this fiscal year. There is interest in the market for this type of program product and it will give visibility to the existing program… The markets are always volatile. There is maybe two years it was COVID, tomorrow it can be something else.”
In a volatile market, giving some kind of guarantee is also difficult, but despite this, PFRDA aims to offer this type of product to its subscribers, he said.
Answering the question of why one should choose assured return if in the normal course it offers a rate above 10%, he explained that there are different patterns in people’s investment behavior.
Many people in the upper age bracket may think they have reached a stage that is not worth taking a risk in a volatile market.
The average of more than 10% delivered in the past over a decade may decline and market-linked returns offer no guarantees, so the assured return proposition may be promising for investors.
PFRDA offers two flagship pension schemes – NPS and APY. While the National Pension System (NPS) caters to employees in the organized sector, including central and state governments, the Atal Pension Yojana (APY) caters to the pension needs of those working in the unorganized sector of the country, which accounts for most of the job creation in the country.