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NPS maximum age to be hiked to 70, guaranteed return product proposed by PFRDA

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MUMBAI: The Pension Funds Regulatory and Development Authority (PFRDA) has proposed a hike in the maximum age of entry into the National Pension System (NPS) from 65 to 70.

The regulator has also proposed that subscribers who join after the age of 60 would be allowed to continue their NPS accounts till the age of 75. For other types of subscribers the maximum age of maturity is 70.

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The pension funds regulator has also proposed the creation of a minimum guaranteed pension product in the NPS. At present the NPS is a defined contribution system which means that its pension depends on the performance of the NPS pension funds. According to the PFRDA, a request for proposals (RFP) for the design of such a product will be floated in 15-20 days.

“Around 15,000 subscribers over the age of 60 have joined the NPS over the past 3.5 years when we raised the age of entry from 60 to 65,” PFRDA chairman Supratim Bandyopadhyay told reporters during an online press conference today. This has made the regulator consider further increasing the maximum age limit.

PFRDA which recently concluded a licensing round for pension fund managers is also proposing to make licenses ‘on tap’ in the NPS. A second window of around 45 days would be opened for new applicants and based on the experience there, the regulator would institute an ‘on tap’ system, Bandyopadhyay added. In the current round, PFRDA awarded a license to Axis Asset Management Company apart from renewing the licenses of existing license holders. However, two players—Aditya Birla Sun Life and Kotak Pension Fund have to meet certain regulatory requirements within specific timelines in order to meet the license conditions. The regulator is also considering hiking the fees that agents in the NPS can charge called Points of Presence (PoPs), Bandyopadhyay added.

The PFRDA is also looking at a proposal to enable employees to ‘commute’ or withdraw fully their pension pots if the size is below 5 lakh. This is currently permitted for pension pots below 2 lakh. 40% of such withdrawals will be taxable with the balance 60% amount being tax free. The taxable amount is added to your total income and taxed at your slab rate. The regulator is eyeing an increase in subscribers in NPS by 1 million in the current financial year, up from around 6 lakh in FY 2020-21. For NPS and Atal Pension Yojana (APY) combined, the PFRDA expects to add around 10 million new subscribers in the current financial year, up from 8.3 in the past financial year. The PFRDA oversees assets of around 5.78 lakh crore under NPS and APY and has 42.4 million subscribers as of 31 March 2021.

“The life expectancy in India has increased and a good social security system is lacking. There aren’t enough savings products for senior citizens. So the move to hike the maximum age of entry into the NPS is a good one. Similarly, if a guaranteed minimum pension is created, NPS and EPF will become more fungible and employees have more choice on which system to choose,” said MD and CEO of SBI Pension Fund, Narayanan Sadanandan.

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