Pension regulator PFRDA mulls minimum assured return product launch

NEW DELHI: The Pension Fund Regulatory and Development Authority (PFRDA) is planning to introduce innovative retirement benefit products, such as one providing minimum assured return, to attract more subscribers.

“Apart from NPS and Atal Pension Yojana (APY), we propose to have some innovative products to attract more and more customers. The first product that we are targeting is a product which will have a minimum assured return,” PFRDA chairman Supratim Bandyopadhyay said. 

He urged actuarial professionals to help the pension regulator in designing the new product.

“The moment they (pension fund managers) start giving guarantee on products, it will have a lot of bearing on their capital requirements and capital adequacy structure,” he noted, adding that inputs from actuaries can play an important role.

Currently, pension funds are managed under the mark-to-market accounting method, and so giving a guarantee, even if it is a floating guarantee, calls for a lot of skill in designing the product.

He added that another area the regulator (PFRDA) is focusing on is providing higher annuity or pension that can offer higher rates to subscribers at the time of exit from the National Pension System (NPS). 

“At the time of exit (from NPS), the only option that we give is that at least 40 per cent of the retirement corpus has to be annuitized. Currently, the annuity rate, which normally tracks interest rate in the market, is going down, and he added that the lower annuity rates have resulted in discontent among the old generation,” Bandyopadhyay added.

The chairman said the number of NPS subscribers, including Atal Pension Yojana (APY), has seen a year-on-year growth of 20 per cent as of February.

During the lockdown, when there were restrictions on mobility, over 70 lakh new subscribers were added to APY alone.