The overall assets under management for the NPS universe grew over 22 percent to Rs 8.53 lakh crore.
The National Pension System (NPS) may be the focus of attention at present due to several state governments' decision to revert to the old pension system, but its voluntary subscriber base continues to register sharp growth.
Rise in voluntary subscriber base
NPS’s all-citizens-model’s subscriber base – which is open to all Indians looking to save for their retirement– saw a growth of 36.42 percent year-on-year in December 2022.
The corporate model that allows employers to contribute to their employees' retirement corpus, reported a 21.17 percent growth, as per the December 2022 figures released by the Pension Funds Regulatory and Development Authority (PFRDA). The current subscriber bases under the two models stand at 26.52 lakh and 16.24 lakh respectively.
The number of subscribers to the Atal Pension Yojana (APY), which is designed to provide pension income to unorganised sector workers, increased from 3.34 crore to 4.38 crore, a growth of nearly 31 percent.
Overall, the NPS subscriber base, including state and central government employees, grew 24.62 percent to 6.06 crore, up from 4.86 crore as on January 1, 2022.
Old vs new pension systems
A large section of government employees is dissatisfied with NPS, which is a defined contribution system. Government employees who joined post January 1, 2004 were enrolled into the new pension system, which was subsequently extended to all Indian citizens in the age group of 18-65 years.
Under this system, the pension payout post-retirement depends on returns generated by the corpus accumulated during the working years and hence not guaranteed.
In contrast, the old pension scheme is a defined benefit system where pension is linked to the employee’s last drawn pay. Not surprisingly, many government employees want states to revert to the old, guaranteed pension system.
Minimum assured return plan in the works
The overall assets under management (AUM) for the NPS universe grew over 22 percent to Rs 8.53 lakh crore. “War (Russia-Ukraine conflict), high inflation and interest hikes by all central banks, including the Reserve Bank of India, affected the performance of our debt portfolio. This is our prime portfolio because of the presence of government subscribers – a large part invested in corporate debt and government securities,” PFRDA chief Supratim Bandyopadhyay said. Bond prices and yields share an inverse relationship; high interest rates lead to lower bond prices.
He also reiterated PFRDA’s plans to introduce a minimum assured return plan to attract risk-averse investors looking for a guaranteed payout post-retirement. “It is still under the board’s consideration and we expect the approval to come through in 7-10 days. But we have agreed on some basic parameters. For instance, it will be guaranteed for 10 years. It could come with a minimum guaranteed return of, say, 5 percent,” he added.
Over a 13-year period ending December 31, 2022, NPS equity funds delivered a return of 12.28 percent CAGR (compounded annual growth rate). Corporate bond funds registered a 9.24 percent CAGR growth during the same period. Government securities schemes fetched 8.65 percent returns annually during the period.
