National Pension System (NPS) subscribers might soon enjoy minimum assured return under the scheme. As of now, NPS is directly linked to securities such as equity, debt or hybrid which is why there is no guaranteed fixed return.
However, according to a Financial Express report, the
Pension Fund Regulatory and Development Authority (PFRDA) has invited Actuarial firms to design and develop Minimum Assured Return Scheme (MARS) for the NPS subscribers. These firms have been asked to design and develop a minimum assured return scheme which can be implemented under NPS.
Pension Fund Regulatory and Development Authority (PFRDA) has invited Actuarial firms to design and develop Minimum Assured Return Scheme (MARS) for the NPS subscribers. These firms have been asked to design and develop a minimum assured return scheme which can be implemented under NPS.
It may be noted that initially, NPS was started for just Central government employees. However, in 2009 it was extended to all the citizens of India. Going forward, while there won't be any guaranteed fixed return under NPS, there might a minimum return over a period of time.
The FE report mentioned that even if MARS is implemented, there might be a reset period or any other time period recommended which will strike a balance between Pension Funds who offer these products and subscriber interest.
Worth mentioning here is that one of the major challenges for this might be that under the all Citizens model of the scheme, all citizens are not entitled to contribute 14 per cent of their salary, unlike government employees and corporates. These peculiarities will decide the lock-in period and other things concerning MARS.
It is also worth noting that Finance Minister Arun Jaitley announced major changes to National Pension System (NPS) last year in December which benefitted 36 lakh central government employees. The government increased its contribution for central government employees to 14 per cent as against 10 per cent earlier. Secondly, the government made NPS withdrawal, upon retirement absolutely taxfree.
