PFRDA Plans Systematic Withdrawal Plan For Pension Account Holders

PFRDA, the pension fund regulator, intends to issue a systematic withdrawal plan that will allow pension account holders to withdraw a lump sum fund of their choice upon reaching the age of 60, as per PTI report.

"It is at a very advanced stage. Hopefully, by the end of next quarter we should be able to come out with a scheme like that," Deepak Mohanty, Chairman of the PFRDA, told PTI in an interview. Users of the National Pension Scheme (NPS) are currently only permitted to take up to 60% of their retirement savings as a lump payment after turning 60; the remaining 40% must be placed in an annuity. Contrarily, a systematic withdrawal plan will permit NPS members to withdraw money until they are 75 on a monthly, quarterly, half-yearly, or annual basis.

""Many people requested that why we cannot stay with the fund. When my fund is giving a very good return why should I take an annuity. I like to stay on and draw that money on the frequencies on a monthly basis or quarterly basis. But that option we cannot provide as of now. So we are asking for a product like that," he said.

In order to account for longevity, the admission and exit ages for pension funds were raised to 70 and 75, respectively, by the Pension Fund Regulatory and Development Authority (PFRDA). He asserts that annuity payments can be delayed in order to get a significantly larger payout depending on the financial situation of subscribers, and those who can do so should do so.

"So what we're trying to do is come up with a systematic withdrawal plan that is permitted under our statute," he explained. "Someone will take a deferred annuity and can draw the balance 60 percent in a systematic withdrawal plan." When asked about the proposed PFRDA Act modification, he stated, "We have made some suggestions to the government." And one significant suggestion in the amendment is an alternative pension product.

In addition, he said that due to consistent payments from subscribers, the asset under management (AUM) for pension schemes is expected to surpass Rs 10 lakh crore in the first half of the current fiscal year. The National Pension Scheme (NPS), Atal Pension Yojana (APY), and NPS Lite are among the assets under management (AUM) that, based on the most recent data, have reached Rs 9.58 lakh crore.

"Our AUM has grown to approximately Rs 9.5 lakh crore. Therefore, it should not come as a surprise if, by the middle of this fiscal year, we surpass the enchanted threshold of 10 lakh crore in NPS corpus. According to him, it is dependent on a wide range of additional factors, including the success of the market and the return the fund delivers. Due to mark-to-market accounting, the AUM corpus is affected by market volatility. He said that out of Rs 9.58 lakh crore, Rs 9.29 lakh crore is the fund amount of NPS alone, and the remaining Rs 28,538 crore is the corpus of APY.

Mohanty claimed that the number of NPS subscribers had already surpassed 10 lakh last year. He claimed that due to the expansion of this market, "We anticipate the number of customers to reach 13 lakh this year. To reach this amount is our goal. According to him, NPS is made up of contributions from government workers and the private sector, with the government sector operating automatically because contributions keep flowing in on their own, but the private sector needs to expand.

For this, the regulator is taking a lot of actions, according to Mohanty. For instance, the PFRDA has permitted even the agents to underwrite NPS, and trade bodies are being educated to encourage NPS among corporations. "On the digital side, we've taken a lot of initiatives, like e-NPS, where one can do it themselves instead of going through an intermediary," he stated.