PFRDA forms expert committee to frame assured payout mechanism under NPS

PFRDA CHAIrman S Ramann saiD Access to Pension Products is essential for every Citizen as long-term financial security cannot be left to chance

In a move aimed at making the National Pension System (NPS) more attractive for risk-averse citizens to build a retirement nest egg, India’s pension regulator has constituted an expert panel to help develop an assured pension income product. 

 

In a statement on Tuesday, The Pension Fund Regulatory and Development Authority (PFRDA), said it has formed a high-level committee to formulate guidelines and regulations to enable a framework for assured payouts under the NPS. The 15-member committee, chaired by M S Sahoo, a former chairperson of the Insolvency and Bankruptcy Board of India (IBBI) and the founder of Dr Sahoo Regulatory Chambers, will function as a standing advisory body. “The move aligns with the provisions of the PFRDA Act and aims to enhance the security of retirement income for subscribers,” the PFRDA statement said, terming this a significant step towards the broader vision of a Viksit Bharat 2047, where every citizen achieves true financial independence and dignity in their golden years. 

 

To be sure, the PFRDA had been attempting to devise a market-based assured pension product for a few years now. However, this committee, which includes experts from various disciplines including law, actuarial science, finance, insurance, capital markets and academia, is the first structured effort to come up with a design and framework for an assured pension product. The panel has also been empowered to invite external specialists and intermediaries for wider consultations.

 

The committee’s mandate includes requires creating regulations for assured payouts, including exploring the pension schemes as highlighted in a PFRDA consultation paper dated September 30, 2025, and ensuring a seamless transition for subscribers from the accumulation phase to the decumulation or “payout phase”. The panel will also deliberate on market-based assurance mechanisms, including novation (related to contracts) and settlement concepts, to ensure that legally enforceable and market-based guarantees.

 

Moreover, the panel will propose an operational design that would include defining terms such as lock-in periods, withdrawal limits, pricing mechanisms and fee structures for pension product providers. Establishing robust risk management norms, including capital and solvency requirements,  and examining tax implications for payouts that do not require a subscriber to exit the NPS architecture, are also part of the Sahoo committee’s tasklist. To protect consumers, the committee shall also develop standardised disclosure frameworks to prevent sim-selling and manage subscriber expectations regarding the nature of assurance and market-based guarantee.

 

“The number of NPS accounts at present is about 7.5 million. As of now, this is not something to talk about,” PFRDA Chairman S Ramadan said on Tuesday, stressing that the perception of pension being a government-only product needed to change. 

 

“It is essential that every citizen has access to pension products because long-term financial security cannot be left to chance. ‘Grow rich before you grow old’ requires a strong culture of disciplined, long-term savings,” Ramann emphasised. 

 

The regulator is also eyeing changes in the norms governing the distribution of the NPS to drive wider participation, he said at the launch of the Pensionbazaar platform by Policybazaar. “The current scale of the scheme remained modest... We will tweak rules around distribution to ensure more participation in the scheme,” he noted. “We want individuals to remain invested in the NPS system for 20 years… 30 years, or even longer,” the PFRDA chief said.

 

Separately, the PFRDA also released the NPS Vatsalya Scheme Guidelines,  providing comprehensive information on scheme announced in the Union Budget 2024-25 and launched in September 2024 by Union Finance and Corporate Affairs Minister Nirmala Sitharaman. The NPS Vatsalya is a contributory savings and long term financial security scheme designed exclusively for minors, that enables parents and legal guardians to systematically build long-term savings for their children from an early age, “Retirement planning in India has traditionally taken the back seat to other financial priorities,” said Yashish Dahiya, chairman and group chief executive officer, PB Fintech.