More than 1.2 million subscribers in the private sector are registered under the National Pension System (NPS), says the Pension Fund Regulatory Development Authority (PFRDA).
Overall, the total number of NPS and Atal Pension Yojana (APY) subscribers has crossed 20.5 million with overall assets under management (AUM) of more than INR2,250 billion (US$34.6 billion).
The NPS, established in 2004 and promoted by the government, provides the platform for every segment of society to save for retirement. The APY, launched in 2015, is a government-backed pension scheme targeted at the unorganised sector.
Meanwhile, the PFRDA, established in 2005 to act as regulator of the pension sector, continues its fight to become the umbrella authority for all pension products.
Currently, the system of entry and exit as well as the withdrawal process are different across products offered by the PFRDA, Employee Provident Fund Organisation, banks and insurance companies such that the situation often leads to confusion among customers.
The IRDAI and the Pension Fund Regulatory and Development Authority (PFRDA) have been holding talks with the Finance Ministry over the regulation of pension products.
For several years now, the PFRDA has been saying that it should regulate all pension products sold by insurance companies as well as mutual funds. The Finance Ministry is yet to take a decision on the matter, reported Moneycontrol.
Meanwhile, there are differences in annuitisation of policies. For instance, an insurance company’s pension product mandates that the annuity product at end of policy term can only be bought from the same insurance company. Meanwhile, National Pension Scheme rules state that they can be bought from multiple life insurance companies.
In January 2012, IRDAI had said pension products would have to guarantee an assured benefit in the form of a non-zero rate of return, which would need to be disclosed upfront. Further, it said an annuity has to be bought from the same company. These regulations led to slower approvals of pension products. Initially, there was a dearth of pension products in the market. However, the gap was filled after some private life insurers launched pension products.