“Under the PFRDA Act, we have the mandate to launch a minimum assured return scheme. Under pension fund (PF) schemes, the funds that are managed are mark-to-market. So obviously there is some volatility and the valuation is according to the market movement.
“So under that, there may be some people who would like to have some minimum assurance (on return). So for that, we are working with our pension fund managers and some actuarial firms to find out what could be the ideal (minimum) level of guarantee that can be given,” Bandyopadhyay told .
But still the guarantee will have to be linked to the market because ultimately it is fund managers who have to give the guaranteed portion of the return on investment, he said.
On being asked if PFRDA would be able to launch this product during the current fiscal itself, he said, “We will try. This is a product that we will be giving out of our own.”
Otherwise, if you see, NPS and APY are the products that have been created in consultation with the (Finance) Ministry, the official said further.
However, the PFRDA added many features to the National Pension System (NPS) scheme as the basic product was envisaged by the government and the authority helped in creating the product. Similar is the case with the Atal Pension Yojana (APY), he said.
“So this will be the first product to be launched by the PFRDA. Here the actuarial aspect plays a very-very crucial role because in our existing products we are not guaranteeing anything. Whatever the market returns are, net of costs, we are passing it on to the customers wherein basically the investment risk is with the customer,” Bandyopadhyay said.
The PFRDA administers two government pension fund schemes –NPS and APY. Whereas the former is mainly for the government sector employees (central and state), autonomous bodies and corporate organisations, the APY is targeted at the unorganised sector.
NPS is a voluntary, defined contribution retirement savings scheme that enables subscribers to make optimum decisions regarding their future through systematic savings during working life. The individual savings are pooled into a pension fund which are invested by the PFRDA regulated professional fund managers as per the approved investment guidelines.
The pension fund managers invest the money into diversified portfolios comprising government bonds, bills, corporate debentures and shares. These contributions grow and accumulate over the years, depending on the returns earned on the investment made.
APY caters to mainly those who are not part of any social security schemes and are not income tax payers. A subscriber gets eligible for a monthly pension of Rs 1,000 to up to Rs 5,000 after the retirement age of 60, depending on the contribution, which is based on the age of joining the scheme.