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Informist, Wednesday, May 20, 2026

 

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--PFRDA head: Raising awareness that pension is long-term product
--CONTEXT: Comments by PFRDA Chairman Ramann in an interview with Informist
--PFRDA head: Some foreign cos keen to set up pension fund in India
--PFRDA head: Focusing on allowing more growth assets to boost returns
--PFRDA head: Need more growth assets to give inflation-protected returns
--PFRDA head: Evaluating direct financing into infrastructure sector
--PFRDA head: Minimum assured plan still 'very much' on table

 

By Priyasmita Dutta and Sagar Sen

 

NEW DELHI - The Pension Fund Regulatory and Development Authority is focussed on increasing the investment of pension corpus under the National Pension System in more "growth assets" to ensure inflation-protected returns are given to subscribers, Chairman S. Ramann said. "We need more of growth assets in the portfolio so that we are giving a proper inflation protected return to the subscribers," Ramann told Informist in an interview. 

 

These "growth assets" will include the infrastructure sector which has a steady demand for patient capital to flow into it. "Whether it is through the bonds issued by them or maybe through a more direct financing method, we will have to see how that emerges," he said. 

 

The NPS is a market-linked annuity scheme under which individuals contribute regularly during employment and receive a pension linked to the fund performance upon retirement. Under NPS, state government employees contribute 14% of their salary every month to the pension fund, and a matching contribution is paid by the state government. The system is administered and regulated by PFRDA. The new pension system is mandatory for central government employees, while others may join voluntarily.

 

Currently, 10 pension fund managers operate under PFRDA--LIC Pension Fund Ltd., SBI Pension Funds Pvt. Ltd., UTI Pension Fund Ltd., HDFC Pension Fund Management Ltd., ICICI Prudential Pension Funds Management Co. Ltd., Kotak Mahindra Pension Fund Ltd., Aditya Birla Sun Life Pension Fund Management Ltd., Tata Pension Fund Management Pvt. Ltd., Axis Pension Fund Management Ltd., and DSP Pension Fund Managers Pvt. Ltd. Together, they manage a pension corpus of INR 16.5 trillion

 

In January, the PFRDA board had approved a framework allowing scheduled commercial banks to independently set up pension funds to manage pension corpus. This was aimed at addressing regulatory constraints that limited bank participation in managing pension corpus so far. According to Ramann, the interest from banks following this move has been "very good". 

 

He also said that PFRDA's much talked about Minimum Assured Pension plan is still "very much" on the table. "We are certainly looking at the concept of Unified Pension Scheme for private sector. That is the way it is easily understood if one has a guaranteed scheme," he said.

 

The pension regulator had done considerable work on the minimum assured pension plan and was set to launch it in 2023-24 (Apr-Mar). However, little to no work on it was done after April 2023 when the government set up a four-member committee headed by then finance secretary T.V. Somanathan, who is currently the Cabinet Secretary, to review the National Pension System. 

 

This committee had then proposed the Unified Pension Scheme which retains employee contributions but guarantees a pension equivalent to 50% of the average basic pay drawn in the final 12 months of service. A floor of INR 10,000 per month is set for those with at least 10 years of service. The scheme also includes inflation-indexing to preserve real value.

 

Below are the edited excerpts from the interview:

 

Q. How do you see the recent geopolitical issues impacting the investor sentiment who are still thinking of joining the pension scheme?

A. Over 30 to 40 years, we've seen equity grow faster than every other asset class, whether it's gold or real estate. So, no decision can be taken based on some immediate events, and these immediate events will keep happening. The long-term strategy of asset allocation is exactly that, it is long-term. You cannot take a short-term view. If you take a short term view, you're bound to lose money.

 

So, we have to make people aware that there is something called an India growth story, there is something called the future predictions of how different sectors are growing within the country. It's a country which is very different from the developed countries. You may have different worries in those countries, you may have different problems here.

 

Our expectation of growth of long-term capital is very very bullish in India, for the reason that there is a huge growth path which has already been defined by various policy makers. So, our job is to ensure that we hold the confidence of the people, give them adequate information and awareness that cause a long-term journey. Stick to it, that's it.

 

Q. In near future, the foreign direct investment in pension sector is expected to be hiked to 100%. What sort of interest are you seeing from foreign pension funds?

A. To be honest, we have not received any written request. The notification for 100?I in pension is still awaited. But there are discussions that are happening. Some people are keen on coming into India with a pension fund. But there is nothing substantive at the moment.

 

Q. Infrastructure financing companies have said that there is appetite for pension funds to invest in long term projects. Is there any plan to channelise pension corpus to flow into infrastructure sector?

A. We are putting money in infrastructure bonds. We have government bonds and we have corporate bonds. In corporate bonds, we have allowed all investment grade corporate bonds to be a part of the portfolio. So, I don't see any regulatory constraint or guardrails which are very tight.

 

We have actually made the guardrails quite open. It is for the pension funds to see the value in the various instruments that are issued in the country. And then they will have to take a call.

 

Infrastructure is certainly a very important area. What we are actually trying to do is with the help of an expert committee that we have set up, we are trying to look at what further investments can be made by the pension funds. So, in that, we are open to looking at a variety of different assets.

 

The Alternative Investment Fund was one such asset which we have now permitted. It will give you a flavour of many different industries, many different maturity levels of companies. Some are younger companies, some are more mature companies. We feel that the AIF class is a very useful and steady class of asset. Again, you have to look at it over a 20-25 years period.

 

Q. What other financial instruments may be considered for giving good returns to the subscribers?

A. Right now, it is still a discussion that is happening. We will have to see how to bring in more growth assets. The whole focus is on growth assets. The growth asset becomes important in the context of the fact that most government security yields will start coming down. What we are seeing right now is a very temporary phenomenon. Over a period of time, the G-Sec yields will come down. Therefore, we need more of growth assets in the portfolio so that we are giving a proper inflation protected return to the subscribers.

 

Q. Have you identified few of these growth assets that may help improve returns?

A. The large infrastructure space allows for a lot of patient money to flow in. So, that is certainly one class. Now, whether it is through the bonds issued by them or maybe through a more direct financing method, we will have to see how that emerges.

 

Q. Is the minimum assured plan still on table?

A. Very much. We are certainly looking at the concept of Unified Pension Scheme for private sector. That is the way it is easily understood if one has a guaranteed scheme.

 

So, how to bring in the guarantee element? Who is going to spend on that guarantee? Who is going to bear the cost of the guarantee? Finally, it is the subscriber who bears some of the cost of that guarantee. Now, they should be aware of it. They should be open to it.

 

They should still feel that the return that they are getting with the guarantee fee is still of high value. So, you cannot force people to take a product but you have to design the product such that choice is available to people. They will evaluate the choices and they will choose one of the products.  End

 

Edited by Akul Nishant Akhoury

 

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