PFRDA Unveils Policy Reforms to Promote Sustainable Growth of NPS
The Pension Fund Regulatory and Development Authority’s (PFRDA) board has approved a framework to permit Scheduled Commercial Banks (SCBs) to independently set up Pension Funds to manage NPS, with the objective of strengthening the pension ecosystem, it was announced on Thursday.
Objectives of the New Framework
This move aims to enhance competition and safeguard subscriber’s interests. The proposed framework seeks to address existing regulatory constraints that had limited bank participation till now, said Ministry of Finance in a statement. By introducing a clearly defined eligibility criteria based on net worth, market capitalisation and prudential soundness in line with RBI norms, it will ensure that only well-capitalised and systemically robust banks are permitted to sponsor Pension Funds.
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Eligibility Criteria for Banks
The detailed criteria will be notified separately and will apply to both new and existing Pension Funds. This will provide a level playing field for all banks and ensure that only eligible banks can set up Pension Funds.
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New Trustees Appointed to NPS Trust Board
PFRDA has appointed three new Trustees on the Board of NPS Trust, pursuant to the selection process initiated by PFRDA. These are Dinesh Kumar Khara, Former Chairman, State Bank of India; Swati Anil Kulkarni, Former Executive Vice President, UTI AMC–Trustee; and Dr. Arvind Gupta, Co-Founder and Head, Digital India Foundation and Member of the National Venture Capital Investment Committee under the Fund of Funds Scheme managed by SIDBI.
Khara has also been designated as the Chairperson of the NPS Trust Board. This move is expected to bring in fresh perspectives and expertise to the NPS Trust Board, which will help in promoting the growth of NPS.
Revised Investment Management Fee Structure
In order to align with evolving realities, aspirations of the public, international benchmarks and the objective of expanding coverage across corporate, retail and gig-economy segments, PFRDA has revised the Investment Management Fee (IMF) structure for Pension Funds to safeguard subscriber interests with effect from April 1, 2026.
The revised slab-based IMF introduces differentiated rates for government and non-government sector subscribers which shall also apply to schemes under the Multiple Scheme Framework (MSF), with MSF corpus being counted separately. This move is expected to make the NPS more attractive to subscribers and promote its growth.
Expected Outcomes of the Policy Reforms
PFRDA expects these policy reforms to help the subscribers and stakeholders to access a more competitive, well-governed and resilient NPS ecosystem, leading to improved long-term retirement outcomes and enhanced old-age income security.
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