The pension Assets Under Management (AUM) have reached a new milestone and crossed the ₹6-lakh crore mark two days back, Pension Fund Regulatory and Development Authority (PFRDA) Chairman, Supratim Bandyopadhyay, has said. It has just taken seven months for addition of ₹1-lakh crore in AUM, which crossed the ₹5-lakh crore mark in October 2020.

“We had initially thought this ₹6-lakh crore AUM would be achieved by end March 2021. But we had missed it out due to market conditions. However, within one-and-half months we have now reached the ₹6-lakh crore level,” Bandyopadhyay told BusinessLine .

It maybe recalled that the pension AUM, as of end March 2021, stood at ₹5.78-lakh crore (₹4.17-lakh crore as of end March 2020).

Bandyopadhyay said that the PFRDA was now looking at an AUM target of ₹7.5-lakh crore by the end March 2022. “I am happy that whatever projections we had made two years back.. we are on track. At this rate, I believe we are on path to reach the projected level of ₹30-lakh crore by the year 2030,” he added.

Variable annuities

Bandyopadhyay said that work is on towards amendments to the PFRDA Act and once this gets Parliament nod, then pension fund managers and even the PFRDA will be in a position to roll out other payout products (such as systematic withdrawal plan) that will be distinct from annuities.

He highlighted that annuity rates in the market have fallen and many retirees are unhappy about the current level of returns.

The need for variable annuities – where the returns vary according to the market related benchmark – has all the more increased, given that annuity rates have fallen in line with sharp fall in interest rates in the system.

Meanwhile, the PFRDA Board has given approval for National Pension System (NPS) subscribers with corpus up to ₹5 lakh to withdraw their accumulations on retirement funds without mandating their investment in annuities. “This decision is expected to be shortly notified. We are also alerted our CRAs to be ready with the changes,” Bandyopadhyay said.

The pension regulator’s Board has also approved extension to the maximum entry age for availing the NPS benefits to 70 years from the current 65 years. Simultaneously, the exit age limit is also being extended from 70 years to 75 years. “This decision will be notified soon and will get implemented this year,” he added.

MARS

The PFRDA has floated a request for proposal (RFP) to appoint a consultant to help design a Minimum Assured Return Scheme (MARS) under the NPS.

The whole idea behind having MARS is to have a separate scheme that can offer a guaranteed minimum rate of return to NPS subscribers, especially those who are risk averse. Currently, the NPS gives returns annually, based on prevailing market conditions.

The appointed consultant, with requisite actuarial skills, is expected to help formulate/design a MARS that can be offered to the existing and prospective subscribers by pension funds.

The chosen consultant is also expected to set up a procedure to evaluate and approve basic scheme design modifications by pension funds and supervise MARS. The consultant would be required to prescribe fees, solvency requirements, risk management and reporting mechanisms for pension funds in respect of MARS, according to the RFP document.

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