NPS Sees 24% Returns In 2023 Backed By Market Rally, Says PFRDA Chairman

With the markets scaling new highs in 2023, the National Pension System bagged a return of over 24% for the year and a 13.3% return since the scheme's inception, according to Deepak Mohanty.

With the current corpus of around Rs 11 lakh crore, about 17% of NPS subscribers are in the equity scheme, said Mohanty, chairman and managing director of the Pension Fund Regulatory and Development Authority.

Since the market is doing well, the returns in the equity scheme in 2023 were "good returns by any standard", he said.

The annual return since the inception of the composite fund is around 9.5%, according to Mohanty. "These are competitive returns, but there are challenges and we have to increase awareness in this scheme, and onboarding informal sectors also needs a little more of a nudge."

There are more than 7 crore active subscribers in the pension ecosystem, and NPS has about 1.41 active subscribers, he said. Of the active NPS subscribers, around 90 lakh come from the government sector and over 51 lakh are from the private sector, Mohanty said. "Our objective is to expand this part."

Even as two types of accounts are available in NPS, tier-2 is the preferred choice over tier-1, according to him. "As one can invest 100% in equity, we are seeing more and more people investing through tier-2 account."

After pursuing the private sector through outreach programmes, reaching out directly to corporates, and trying to reach the trade bodies, over 15,000 corporates joined, Mohanty said. But, the problem is that the take-up rate by employees is not very high, he said.

One initiative that the PFRDA has brought in is the Systemic Lumpsum Withdrawal plan, Mohanty said. Investors can withdraw 60% of retirement corpus, either as lump sum, or can stay in the system and do it over 15 years. Also, the annuity compound, which is at 40%, can be deferred to 75%, he said.

More options such as a Systematic Investment Plan and guaranteed returns are in the works, he said. "We are working towards that and there are a lot of discussions on that (guaranteed returns)... Hopefully, sometime down the line, we should be able to come out with a guaranteed return scheme."

Over time, the PFRDA has improved the ecosystem—mainly the on-boarding process—through digital methods and a highly transparent system, he said.