PFRDA wants Centre to raise maximum pension under Atal Pension Yojana
In an interview with CNBC-TV18, Deepak Mohanty, Chairman of the Pension Fund Regulatory and Development Authority (PFRDA), said that the regulator has presented the request to the government, but it remains uncertain whether changes will be implemented due to the pros and cons associated with altering the scheme's design.
Deepak Mohanty, Chairman of the Pension Fund Regulatory and Development Authority (PFRDA), on Wednesday, said that the regulator has asked the government to increase the maximum monthly pension amount from Rs 5000, currently, under the government-guaranteed Atal Pension Yojana (APY). However, he acknowledged that there are financial constraints involved, making it a challenging proposition.
In an interview with CNBC-TV18, Mohanty mentioned that the regulator has presented their request to the government, but it remains uncertain whether changes will be implemented due to the pros and cons associated with altering the scheme's design.
Mohanty also revealed that the PFRDA is planning to introduce an assured return pension plan as an option under the National Pension Scheme (NPS). This option aims to cater to individuals who prefer a guaranteed return on their investment.
He stated that although staying invested in the market for 5-6 years can provide implicit assured returns, the lack of absolute certainty creates discomfort for some individuals. To address this, the PFRDA intends to design a scheme that offers an assured return, albeit at an additional cost.
"If someone has staying power in the market for 5-6 years you can then ride the market cycle, implicitly it becomes an assured return but still that comfort is not there because you are at the mercy of the markets...Some people need an assured return, this scheme is designed for them and it will come as an option, obviously, guarantees will have a cost, and pension funds providing this would need to put more capital which will have a cost so there will be a charge. So we have to balance the risk and return so that it looks attractive and meets both the requirements, balancing that we will soon come out with some product," he said.
Regarding the request to raise the maximum pension amount under APY, Mohanty clarified that the PFRDA has communicated this demand during their interactions with the government. However, he acknowledged the existence of financial issues and the specific design considerations of the APY.
As a government scheme, any changes would require the Centre to provide implicit guarantees and necessary provisions. While the response from the government is pending, Mohanty acknowledged that the request could be considered a wish list, as altering the scheme's design carries implications that need careful evaluation.
"....we have requested the government, that is a kind of demand within our interactions, so that could be considered but there are financial issues, pros and cons, and the APY is also designed in a particular manner so should we really change the design on that basis.. If there is no response, we can always ask, it could be a wish list. There are implicit guarantees, someone would have to provide for that, it’s a govt scheme so govt would have to provide for that," Mohanty said.
First Published: Jun 7, 2023 9:40 PM IST
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