PFRDA nod to customised plan for National Pension System (EQUITY EXPOSURE UP TO 100% FOR PRIVATE SECTOR USERS), Pg 21.

Key Highlights:

• PFRDA allowed fund managers to customize NPS schemes with up to 100% equity exposure for private-sector subscribers.
• The Multiple Scheme Framework (MSF) will be effective from October 1.
• Total charges under MSF are capped at 0.3% of AUM annually, with a potential 0.1% incentive for attracting new subscribers.
• Private-sector accounts for a fifth of the total Assets Under Management (AUM) in NPS.

Detailed Insights:

• The new framework enables fund managers to design schemes tailored to specific subscriber profiles, including self-employed professionals and corporate employees.
• Each scheme under MSF must offer at least two variants: a moderate-risk and a high-risk option, with the latter allowing up to 100% equity allocation.
• The existing NPS schemes have charges between 0.03% - 0.09% of AUM per annum, significantly lower than the proposed MSF charges.
• This move aims to increase the attractiveness of NPS to non-government sector employees, potentially increasing private sector contribution to AUM.

Key Concepts Involved:

• National Pension System (NPS): A voluntary, defined contribution retirement savings scheme designed to enable individuals to make provision for their old age.
• Assets Under Management (AUM): The total market value of the investments that a financial institution manages on behalf of its clients.
• Pension Fund Regulatory and Development Authority (PFRDA): The regulatory body responsible for promoting and regulating the pension sector in India.