In order to connect with stakeholders in Mumbai, Pension Fund Regulatory and Development Authority’s (PFRDA) team was in the city. Leading the team for this visit was Supratim Bandyopadhyay, Member (Finance), PFRDA. After interacting with the industry, Bandyopadhyay spoke to the media. He took time to answer a lot of queries that were raised. Former head of LIC Pension Fund, Bandyopadhyay interacted with Free Press Journal’s Jescilia Karayamparambil.
Edited Excerpts
Tell us about the in-principle approval received for amendment of the PFRDA Act?
We have received in-principle approval for the amendment of PFRDA Act. We had proposed some changes in the Act. We had some discussion with CBDT as well. Primarily, we proposed allowing PFRDA to become a regulator body.
We also raised concern over conflict of interest – as PFRDA was the creator of NPS Trust and also pension regulator. So, the government took note of this issue.
In the July mid-term budget, it was announced that both will be separated. To separate NPS trust from the regulator, there is a need to make changes in the Act.
While finance ministry has given in-principal approval, this proposal has to be sent for inter-ministerial consultation. After that, it will be presented in front of cabinet and then finally at the Parliament.
Do you know how much pension fund money is present in the system?
Today, there is around Rs 25 lakh crore in the system which includes EPFO and others. Out of that, only Rs 4 lakh crore is handled by NPS which is one sixth of the total pension funds in the system. EPFO has a large corpus of about Rs 14 lakh crore. (Other pension funds account for Rs 7 lakh crore).
After the amendment of the Act, will Rs 25 lakh crore with EPFO come under the PFRDA?
We wish and that is our long-term plan. But it will depend on what schemes come under us. Under EPFO, there is a small part called EPS and that is the actual pension plan. We are assuming EPS will come under us.
What will be the next move after the Act is passed?
After the Act is passed, we will have to evaluate the changes that will be approved. This is because after inter-ministerial consultation there will be a lot of changes. We hope we are permitted to become the single regulator in the pension space.
What is the development in PF merger with NPS?
EPFO had floated a consultation paper on the same. Later, it withdrew. EPFO wanted to put up a social security bill. In that bill, it was stated that there will be a flow from EPFO to NPS, but they have withdrawn it.
At present, there are more state and central government employees opting for NPS. Do you plan to introduce incentives to get more corporates on board?
We are reaching out to corporates through banks as they have good relations with banks. Through them, we are getting a lot of support. The challenge is not reaching out to them but it is about encouraging their employees to join NPS. No special incentives is not planned (only for them).
The take up ratio of corporates are low. There are only 6,500 corporates registered with us. All the big IT companies are there in our system but the take up ratio there is between two-three per cent.
Today’s generation has different priorities. So, we need to find a way to make them investment savvy. This is one reason we are trying to get in touch with different distributors — to create some awareness. The level of awareness about pension plans in the country is very poor. People feel that it is a long-term product.
There was a survey done on Indian corporates to get some insights into youngsters. The findings stated that one third of the people surveyed felt that they will never retire.
There was one outcome which was very positive and insightful— people are choosing their employers based on the retirement benefits.
Does PFRDA wants to be an annuity regulator?
Yes, PFRDA wants to be an annuity regulator too. We do not like the idea that at the time of exit we inform the pensioner that they are no longer our customer.
About 80-85 per cent people choose annuity for life and opt for giving corpus to his or her legal nominee. Annuity market is quite developed in the country. There are a lot of innovations that are taking place in the space.
Will there be a mutual-fund- style awareness campaign?
This has been in our mind as well. We are thinking about creating an association for pensions. In case of mutual funds, the mutual fund association did a very good job.
Today, Life Insurance Council is doing it as well. This is all done by industry associations. We are also thinking in those lines as well. We initiated it but now we have to decide on the areas we want to work on.
Will there be any disclosure by these fund houses in times to come?
Yes, the portfolio disclosure is getting published in their respective sites. We will try to get all disclosure details either on the PFRDA site or NPS trust website.
Do you plan to expand further into digital space?
Yes, we are considering it. Such partnerships are important to stay in business. We have to compete with what others offer. For the next six to eight months, we will be busy understanding the different aspects of the amended Act (PFRDA expects the Act to be amended in the next Parliament session). Post that, we will focus on this.
Do you see guaranteed returns product as a danger for PF corpus?
Apart from the government, no one can give assured returns. In insurance space, there were guaranteed products which were slowly withdrawn. In insurance market, you will not see a single guaranteed insurance product.
In mutual fund too, there were Fixed Maturity Plans (FMPs) (they give indicative returns and not guarantee), slowly these too have ceased. All the regulators are frowning upon guaranteed products.
