PFRDA chief calls for more awareness, tax support to expand NPS reach

Pension Fund Regulatory and Development Authority (PFRDA) Chairperson S Ramann on Thursday said India must focus on improving financial literacy, expanding pension coverage beyond government employees, and reviewing tax incentives under the new regime.

 

In a fireside chat with Business Standard Resident Editor (New Delhi) Vikas Dhoot at the Business Standard BFSI Insight Summit 2025 in Mumbai, Ramann noted that the National Pension System (NPS) has delivered an average annual return of 9.2 per cent over 15 years, but participation remains skewed. “About 75 per cent of total NPS assets are from government subscribers. We need to change that,” he said.

 

Setting an ambitious target, he said the goal is to raise non-government NPS subscribers from 10 million to 250-300 million in the next five to six years using various digital platforms.

Need for financial literacy

Ramann said financial literacy will be the key to the wider adoption of products such as pensions, insurance, and mutual funds. He pointed out that financial awareness in India remains largely urban-focused, while smaller towns and semi-rural areas still lack basic financial planning guidance. 

 

“There’s tremendous aspiration in small towns; people want to grow their wealth and educate their children better,” Ramann said. He called for a network of certified financial planners across sectors, supported by minimum certification programmes through institutions like the National Institute of Securities Markets (NISM), to help financial planning reach the grassroots level.

 

He also highlighted the role of bank sakhis and self-help group members, who already serve as trusted intermediaries in rural areas, as key players in spreading financial awareness. With India’s strong digital infrastructure and mobile penetration, he said, financial education content can be better targeted to specific groups.

Challenges under new tax regime

The PFRDA chief said the new tax regime has eliminated earlier incentives for NPS subscribers, making it harder to attract new investors. “Nearly 70 per cent of taxpayers are now under the new regime, where NPS tax benefits have disappeared. This is a challenge,” he said. 

 

He added that globally, pension systems are supported through mandates or tax incentives and often help fund infrastructure and startups. India, he said, could learn from this approach.

A choice between EPFO and NPS

On whether employees should be allowed to choose between the Employees' Provident Fund Organisation

(EPFO) and NPS, Ramann said both systems serve different purposes but can coexist and compete. “EPF is a provident fund; it’s about accumulation. A pension, on the other hand, covers both accumulation and payout stages,” he explained.

 

“Ultimately, it’s for individuals to decide which product suits their needs and tax profile best,” Ramann said, adding that healthy competition between EPF and NPS will ensure better returns and choices for savers. 

 

He said while EPF has historically worked well, “we should have competing products, that’s really where we’re moving forward.” Discussions are underway in the new regulatory forum to bring various pension products under a common framework for better coordination, he said.

Expanding pension fund reach

Asked when Indian pension funds could match global giants like CalPERS and Ontario Teachers' Pension Plan, Ramann said the sector must first expand its base and attract more domestic participation.

 

He said that India needs more homegrown pension funds, particularly in tier-2 and tier-3 cities, and cooperative networks. “We already have the world’s best payment systems. By using fully digital and transparent channels, we can safely expand participation and mobilise more domestic savings into pensions,” he said.