You have worked hard to accumulate that sizeable corpus in the NPS in the hope of comfortable sunset years.

Then, at the time of retirement, you realise that 40 per cent of that National Pension System corpus will have to be statutorily parked in annuities, whose returns don’t even beat retail inflation. Don’t despair. Now, there is hope for retirees as pension regulator PFRDA is moving to offer NPS subscribers a wider menu of payout options to choose from on retirement and offset the low rates of annuities.

For this and given that insurance regulator IRDAI is taking time to offer inflation-linked returns products, the pension regulator is now moving to seek statutory backing for offering products with different payout options and linked to market rates. Currently, the regulatory norm requires a person on retirement to invest at least 40 per cent of the NPS funds in annuities. Given the low interest rates in the financial system, the annuity rates are quite low (lower than the official consumer price, or retail, inflation), which has left retirees high and dry.

“In the PFRDA Amendment Bill, which has now been approved by the legislative department, an explicit provision has been added to allow PFRDA regulated products. Our Pension Fund Managers will offer such products that will give regular payouts, but not in the nature of annuities. These products will try to address longevity risk and also offer returns closer to market rates,” Supratim Bandyopadhyay, Chairman, PFRDA, said.

Bandyopadhyay said the current PFRDA law stipulates that exit can be only through annuities. “No other route is legally permissible and so we need to amend this to offer other types of products,” he said.

The proposed Bill missed the recent Monsoon session, he said, and expressed confidence that the version approved by the legislative department will be soon taken up by the Cabinet for approval and then go to Parliament for enactment.

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