PFRDA chairman highlights direct engagement with corporate HR and NPS growth outlook

In a recent statement, the Chairman of the Pension Fund Regulatory and Development Authority (PFRDA) Deepak Mohanty shed light on several key developments related to the National Pension System (NPS) and its engagement with corporate entities. He said that PFRDA is engaging directly with corporate Human Resources (HR) departments.

This initiative aims to enhance awareness and participation in the NPS among employees of various organisations. By forging direct connections with HR personnel, the PFRDA seeks to simplify the enrolment process and provide employees with a clear understanding of the benefits associated with the NPS.

While the NPS has witnessed remarkable growth over the years, the PFRDA Chairman cautioned against unrealistic expectations regarding the pace of Asset Under Management (AUM) expansion. Traditionally, there was an anticipation that NPS AUM would double every two years. However, with the substantial increase in the base over time, the Chairman suggested that the rate of growth might moderate.

The number of subscribers under the NPS and Atal Pension Yojana (APY) together have grown to more than 6.62 crore and the total AUM has reached Rs 10 lakh crore.

Addressing concerns about certain states opting for one-time pension schemes, the Chairman clarified that this decision would not significantly impact the NPS AUM. Contributions made to the NPS are irrevocable, meaning that funds already invested in the system cannot be withdrawn due to changes in state-level pension schemes.

The Chairman, however, expressed optimism, projecting that the NPS AUM could surpass 11 lakh crores in the fiscal year 2024, likely settling within the range of 11 to 12 lakh crores.

One of the key announcements made by the PFRDA Chairman is the launch of the first-ever Systematic Withdrawal Plan (SWP) scheduled for October. This development is poised to revolutionise the NPS landscape by offering subscribers the option to remain invested in the system until they reach the age of 75.

Moreover, the SWP introduces a level of flexibility that has been eagerly awaited by pensioners. Instead of obliging retirees to withdraw 60 percent of their corpus in a single lump sum, the SWP will allow them to opt for periodic withdrawals in monthly, quarterly, or annual tranches.

It is important to note that, in accordance with pension regulations, individuals retiring at the age of 60 under the NPS are mandated to allocate 40 percent of their corpus toward the purchase of an annuity plan. However, the remaining 60 percent will now become accessible through the SWP, providing retirees with a more diversified and flexible retirement income strategy.