“Apart from NPS and Atal Pension Yojana (APY), we propose to have some innovative products to attract more and more customers. The first product that we are targeting is a product which will have a minimum assured return,” Bandyopadhyay said. He was speaking at a virtual actuarial conclave organised by the Institute of Actuaries of India.
Currently, pension funds are managed under the mark-to-market (MTM) accounting method, and so giving a guarantee, even if it is a floating guarantee, calls for a lot of skill and thought in designing the product, Bandyopadhyay said. He urged actuarial professionals to help the pension regulator in designing the new product.
“The moment they (pension fund managers) start giving guarantee on products, it will have a lot of bearing on their capital requirements and capital adequacy structure,” he noted, adding that inputs from actuaries can play an important role.
Another area the regulator is focusing on is providing higher annuity or pension that can offer higher rates to subscribers at the time of exit from the National Pension System (NPS), Bandyopadhyay said.
“At the time of exit (from NPS), the only option that we give is that at least 40 per cent of the retirement corpus has to be annuitised. Currently, the annuity rate, which normally tracks interest rate in the market, is going down,” he said.
The lower annuity rates have resulted in discontent among the old generation, he added. “Can we have some different kind of annuity products wherein the annuity rates would vary according to some market related benchmark?” he suggested. Bandyopadhyay further said the regulator is also planning to introduce an alternative mode of payout to the existing annuity.
“We are thinking in the lines of something called a systematic withdrawal plan. The kind of annuities we have, they will not give the benefits that we are thinking for the retired generation in the long run,” he added. He said the regulator is also considering giving pension projections to new as well as existing subscribers.
“A lot of other countries, as a best practice, are giving pension projections for the customers who are continuing or just joining to understand what kind of pension benefits they are going to get at the end of their working life,” he said. He urged actuaries to join hands with the regulator to give NPS subscribers some kind of pension projection.
The chairman said the number of subscribers in NPS, including Atal Pension Yojana, has seen a y-o-y growth of 20 per cent as of February-end. As of today, 3 crore subscribers have joined APY, he said. During the lockdown when there were restrictions on mobility, there was an addition of more than 70 lakh new subscribers to APY alone, Bandyopadhyay added.