As quite a few as 52 CPSEs, like biggies IOC, ONGC, NTPC, BPCL, GAIL (India), PFC and different railway corporations, have come aboard the Nation Pension System (NPS) with more than one lakh workers more than the last couple of years, assisting expand the cover, even as there has been a stagnation in new job creation by the Centre and a slowing of the pace of recruitment by quite a few state governments.
Helped by distribution partners — mostly banks and banking correspondents —, the NPS subscriber base, which stood at 4.24 crore at the finish of FY21, will get to expand by a record one crore in the present economic year, Pension Fund Regulatory and Development Authority (PFRDA) chairman Supratim Bandyopadhyay told FE in an interview.
Nearly 30 lakh people today had been added to the NPS fold till late August this fiscal, like 28 lakh below the Atal Pension Yojana (APY).
Apart from APY, the private corporate segment and the ‘All Citizens’ Model” (men and women) had been also anticipated to show excellent development, he stated. Citing the precedents abroad, he also stressed the need to have for a universal pension-cum-insurance coverage scheme for the masses, by combining the APY, the biggest element in the NPS in terms of subscription base with two other government-run goods – Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBM) and Suraksha Bima Yojana. APY assures a minimum pension of Rs 1,000-5,000/month to the subscribers, regardless of getting market place-linked, and has a present subscriber base of more than 3 crore.
Of course, there is nonetheless a lengthy road ahead to meet the objective of bringing the country’s complete 45 crore unorganised sector workers below a viable, robust social safety net.
Bandyopadhyay stated: “We have suggested (to the government) that let the APY not be isolated, because while what it offers is pension, when somebody starts contribution, say at the age of 18 or 20, she has a long way to go to get that pension. But, if her life is cut short, then the person or his family doesn’t actually get a good cover, even though the entire corpus created is returned to her nominee. If an insurance cover is also clubbed with the pension facility, say Suraksha Bima for accident cover and PMJJBM for life cover, the wider scheme could be ideal for the unorganised sector workers where the contribution levels are pretty low.”
He stated as in quite a few other nations, ‘nudging’ by the government to decide on the ‘right financial product’ may go a lengthy way in bolstering the social safety net for the low-revenue workers.
With the government sector reaching close to saturation, the non-government sector (excluding Atal Pension Yojana), which at present is only 7% of the total subscriber base, holds important to the development of NPS as properly as expansion of old-age revenue for the masses, he noted.
“Many of the CPSEs had their own superannuation schemes, either they were managing themselves or by insurance companies. When they saw a better option in NPS as it provides much higher post-tax returns and a higher corpus at the time of exit, they have chosen it,” Bandyopadhyay stated. For CPSEs and state-run economic institutions, NPS is not mandatory, though for Union and state government workers, it currently is. “Life Insurance Corporation is also set to shift their employees to NPS soon,” he stated.
The government sector subscribers fetched a return of 12.6% on the NPS corpus in the previous year though it was 8.5% below EPFO and about 8% below a couple of superannuation funds run by insurance coverage corporations. In the last 12 years, the typical annual return of government NPS subscribers has been more than 10%, Bandyopadhyay stated.
In a low-interest regime, it generally becomes tough for quite a few corporate homes like CPSEs to even match the returns offered by EPFO (8.5% for last year), so shifting to NPS enabled them to reduce subsidy charges to match EPFO returns.
Individual NPS subscribers get tax deduction of up to Rs 1.5 lakh below Section 80C of the Income Tax Act and an extra deduction of Rs 50,000 below section 80CCD 1(B). Moreover, NPS contributions by employers (up to 10% of the salary) is permitted as a deductible perquisite for workers below Section 80CCD(2), topic to a ceiling of Rs 7.5 lakh in a economic year. An employer can claim the NPS contributions to employees’ NPS accounts (up to 10% of the salary) as an exempted company expense below Section 36(1)(iva). At maturity, 60% of the lumpsum quantity received by subscribers is tax-totally free and the balance invested for buying annuity is also exempt from tax.
The central government employees’ enrolment grew just 3.5% on year in FY21 and 1.7% among March 31 and August 28, 2021, to a total of 22.13 lakh. Enrolment of state government workers rose 8% in FY21 and grew about 4% from March 31 till August 28 to a total of 53.37 lakh. In contrast, enrollment in the corporate sector, which consists of CPSEs, grew practically 16% in FY21 and by 7% among March 31 and August 28. The present subscriber base in this segment is 12.04 lakh. Total enrollment grew by practically 23% (thanks to Atal Pension Yojana and men and women) in FY21 and by about 7% from March 31 till August 28, to the present quantity of 4.53 crore.
The PFRDA is expecting fresh NPS fund inflows of Rs 1.25 lakh crore in FY22, a development of 22% on year. Depending on market place circumstances, assets below management could see more than 30% development to someplace close to Rs 7.5 lakh crore in FY22, it reckons.