NEW DELHI: A guaranteed pension plan is very much in the works, but such a plan will come at a cost, Deepak Mohanty, Chairman of the Pension Fund Regulatory and Development Authority (PFRDA) said here on Wednesday. Mohanty indicated that subscribers of such a plan will have to make higher contributions to receive guaranteed pensions.
“We have to balance risk and return. When somebody gives a guarantee, it will have a cost. The pension funds will have to bear that cost,” the chairman told the media. He said an assured return product will have to provide higher capital because it is taking more risk (to guarantee a certain return).
“Pension funds have given good returns because they are low-cost plans. The lower cost is partly because they are thinly capitalized. For assured returns, you will have to provide higher capital,” Mohanty added.
The PFRDA Chairman, however, did not give a timeline for the launch of the assured return pension plan.
“We have made some progress and we will come up with that kind of product. At the same time, we have to see that the returns look attractive. Efforts are on to come up with a product that does take off well,” he added. Mohanty, who is also part of the committee looking at improving NPS (New Pension System), refused to divulge the details of the discussion within the committee.
The government has set up a committee under the chairmanship of Finance Secretary TV Somanathan to look at issues of government employees with the NPS. Meanwhile, Mohanty said that there are about 5.3 crore subscribers of Atal Pension Yojana (APY). This year the target for enrolment under APY is 1.3 crore as against 1.2 crore last year.