Pension assets may reach ₹45 trn in 5 years: PFRDA Chairperson S Ramann

Pension assets are projected to triple to ₹45 trillion in five years as PFRDA reforms open up customised products and aim to cover half of India's workforce by 2030

Pension assets under management are expected to reach ₹45 trillion in five years, according to the sector regulator, with the reforms it rolled out this week to bring more players to the field.  The size of the market now is ₹15 trillion. Pension Fund Regulatory and Development Authority of India (PFRDA) Chairperson S Ramann, in a chat with Business Standard, said this would mean about 300 million working-age Indians would subscribe to some product or the other. The PFRDA this week launched a range of amendments to the system in the country. These amendments are to the PFRDA (Exits and Withdrawals under the National Pension System) Regulations, 2015. 

 

As Ramann described them, the changes were meant to “offer schemes that better identify the needs of private sector customers unlike the plain vanilla nine schemes that mostly target government employees”.  The chairperson made it clear that the amendments did not change the scope of the pension schemes for government employees, which would run unhindered. India’s pension market is fractured. Central-government employees who joined service in January 2004 and state-government employees on different dates thereafter have moved to the National Pension System and the more recent Unified Pension Scheme.  They are close to 20 million. Most private-sector employees with a formal employment contract subscribe to a pension scheme run by the Employees Provident Fund Organisation. 

 

They are estimated at 75 million. The rest of the Indian workforce has intermittent access to pension products, of which the Atal Pension Yojana (APY) is the most widely used one. The subscriber base of the APY is close to 61 million, according to the PFRDA database. 

 

This means just a quarter of India’s working-age population has any access to a pension product. The PFRDA hopes to bring all these strands together and also expand coverage to at least half the working adult population by 2030.  The chairperson said he had the backing of Union Finance Minister Nirmala Sitharaman, who is keen to reform the pension architecture of the country. Ramann, who took over as chairperson this year, said he was confident about this mission for two reasons. 

 

The first is that pension-fund managers have been given discretion on how to customise their products. Customers can subscribe to pension schemes or exit them, with the only rider being that they should have a minimum vesting period of 15 years.  “Concepts typical of government-run systems like the age of superannuation, maximum age and others have been done away with,” he said. So a much larger cohort of employees can opt for these products.  The other is that the PFRDA has kept a larger commission purse on the table for distributors to market their products.  The key change, Ramann said, is with these reforms “we have moved away from running the pension business to being a regulator in the true sense of the term. We shall only enforce the rules, strictly”.