NPS subscribers will soon be able to change asset allocation 4 times a year

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The pension fund regulator PFRDA will soon allow subscribers to the NPS scheme to change the investment model up to four times in a fiscal year, as there has been a request to increase the limit, said Tuesday its president.

Currently, subscribers of the NPS plan are allowed to change the investment model twice in a fiscal year.

“We can change the investment choice twice a year. Now, in a very short period of time, we will increase it to four times because there are requests that you allow more times (to change the model of ‘investment), “said PFRDA President Supratim Bandyopadhyay during a webinar on the NPS program hosted by industry body Assocham.

The only caveat the PFRDA wants is that it is a long-term (product) investment to build up a retirement body, and should not be treated like a mutual fund plan. , did he declare.

“People sometimes mix it up with mutual funds that can give good returns. You have to give it time and then only you can use it (change options). Use it wisely, we’ll increase it to four times per year (fiscal year), ”said the Chairman of the Pension Fund Development and Regulation Authority (PFRDA).

Subscribers are allowed to allocate their investments in a combination of instruments such as government securities, debt securities, asset-backed and trust-structured investments, short-term debt investments, and equities and investments. related.

However, there are different rules for different groups of subscribers. For example, public sector employees cannot have high exposure to equities, while employees in the corporate sector are allowed to allocate up to 75 percent of assets to equities.

Separately, subscribers are also allowed to change fund managers once a year. Fund managers invest subscribers’ retirement assets in prescribed investments, at their discretion.

Currently, the pension fund managers under NPS are – ICICI Prudential Pension Funds Management Company, LIC Pension Fund, Kotak Mahindra Pension Fund, SBI Pension Fund, UTI Retirement Solutions, HDFC Pension Management Co and Birla Sun Life Pension Management.

Bandyopadhyay also said that the PFRDA wants to offer a variable annuity product to policyholders after they retire, aimed at protecting them against inflation.

“Once the annuity starts, it stays constant throughout your life. Of course, there is an annuity (product) that gives a simple three percent increase per year but obviously that won’t take on the risk of inflation.

“We spoke with the insurance regulator (Irdai) because annuities are fundamentally their domain and we also discussed with the annuity service providers if they can think of this type of variable annuity that can provide some protection against rising inflation, “he said.

The PFRDA chairman said that the Indian Insurance Regulatory and Development Authority (Irdai) had established a working committee and a report had also been submitted by the committee.

“We are in discussions with Irdai to ensure that this type of product is marketed as quickly as possible,” he added.

NPS subscribers are required to purchase an annuity with 40 percent of the corpus upon retirement to obtain a steady stream of pension.

The official also urged the industry body to urge the companies associated with it to opt for the NPS plan as well as to encourage their employees so that the retirement needs at the time of retirement are well taken care of.

He said that even though the total number of National Pension System (NPS) subscribers, including Atal Pension Yojana (APY), has exceeded 4.80 crore so far, a measly 13 lakh of subscribers are coming from the business sector.

As life expectancy has increased over time and people are living 15 to 20 years longer after retirement, he said it is not easy to generate a huge body of work for retirement and that it was necessary to start preparing from an early age to organize retirement needs.

The PFRDA administers two flagship pension plans: the NPS and the APY. While the NPS primarily targets employees working in government and the organized sector, including businesses, the APY primarily targets those working in the unorganized sector.

(This story was not edited by Business Standard staff and is auto-generated from a syndicated feed.)

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