Pension regulator PFRDA is targeting a faster expansion of the National Pension System (NPS) by leveraging banks' distribution networks and integrating with the UPI ecosystem, as it aims to grow the pension corpus to around Rs 100 lakh crore by 2040, its Chairman S Ramann said on Wednesday.
The regulator is looking to accelerate growth beyond the organic expansion of the pension market by using the existing digital financial infrastructure to bring more people into the long-term savings system.
"In a growing economy, the kind of need for long-term savings from a customer point of view and from a citizen point of view. gives us an estimation that we probably in 2040 will be at a Rs 100 lakh crore AUM," said Ramann while addressing the Tatkal NPS: Advancing Digital Pension Inclusion conference here.
Ramann said the regulator is working towards making NPS enrolment seamless through the Unified Payments Interface (UPI), allowing customers to open pension accounts through existing digital banking and payment platforms with minimal intervention from banks.
The initiative seeks to use existing UPI and banking infrastructure to trigger customer enrolment, with basic details such as mobile numbers and dates of birth facilitating the account-opening process.
"We are saying that there is zero cost to a bank to acquire a customer," Ramann said, adding that the proposed mechanism would allow banks to receive new NPS accounts through existing digital flows without requiring significant additional manpower or infrastructure.
He said PFRDA wants banks to become a major distribution channel for NPS, given their extensive customer base and established digital platforms.
The regulator is also seeking to improve the economics of pension distribution. Ramann said revenues of the top 10 Points of Presence (POPs) have increased four to five times following changes in the commission structure introduced from January 1 this year.
On the investment side, PFRDA is moving towards offering differentiated schemes and asset allocation options for subscribers, recognising that the requirements of government employees, informal-sector workers and financially sophisticated investors differ.
Ramann said investors with the financial understanding and ability to manage their investments should have the option of higher equity exposure, including up to 100 per cent in equity-oriented schemes.
The regulator is also seeking to channel a larger share of pension savings into growth assets.
PFRDA is looking at expanding investments into unlisted equity, project finance and Greenfield and Brownfield projects, besides its existing exposure to real estate investment trusts (REITs) and infrastructure investment trusts (InvITs), he said.
Ramann said expanding pension coverage is also important to address longevity risk and ensure that people have adequate savings to support themselves after retirement.
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