Pension regulator PFRDA has not dropped its earlier plan to introduce a Minimum Assured Return Scheme (MARS) under the National Pension System (NPS), its Chairman Deepak Mohanty said.
“It is very much on our radar. It is still in the works. We have to balance returns and cost of guarantee. I can’t commit to a specific timeline on when it can be introduced. We are working on various formulations and hopefully we should be able to come out with some scheme”, Mohanty said when asked if the regulator has dropped its earlier planned launch of this scheme.
Currently, NPS does not guarantee any kind of returns or benefits as they are market-determined.
However, the government-backed Atal Pension Yojana guarantees a minimum monthly pension of ₹1,000-5,000 to the subscribers based on their contributions.
The initial thinking or basic construct of MARS was to provide assured return of annual 4-5 per cent to NPS subscribers. The whole idea behind having MARS is to have a separate scheme that can offer a guaranteed minimum rate of return to NPS subscribers, especially those who are risk-averse.
Viability of the scheme
Mohanty highlighted that there are issues around providing guarantees as it entailed a cost for the pension funds. As a regulator, PFRDA has to look at the risk that pension funds (PFs) would be exposed to on account of MARS and make sure it is sustainable over longer period of time.
With PFs already working on thin margins, it needs to be seen if such guarantee product would be feasible for them or not.
MARS has been in the works for couple of years now.
The Pension Fund Regulatory & Development Authority (PFRDA) had earlier indicated that MARS would get launched in September 2022. However, it has not been able to roll it out till date.
To enable pension funds and their sponsors to offer MARS-like products, PFRDA has already tweaked the capital requirement norms for the sponsors and stipulated higher networth and paid-up capital for those looking to set up pension funds in the country.
Meanwhile, Mohanty expressed confidence that NPS assets under management would cross the ₹12-lakh crore mark this fiscal. The AUM has already crossed the ₹ 11 lakh crore mark on January 10 this year.
Asked if PFRDA has set the AUM target for next fiscal, he replied in the negative. “We have not yet set the target for 2024-25. There is still time. We have to see the performance during this last quarter which is crucial in setting the target for 2024-25”, Mohanty said.