2023-09-27 12:26:40
Pension regulator PFRDA has sweetened the deal for government sector NPS subscribers by giving them an additional investment option of default scheme for their tier-II accounts.
Government sector subscribers under NPS have been given additional investment option of default scheme along with the existing Scheme E / Scheme C / Scheme G investment options.
This will facilitate such subscribers to have access to a simplified default investment scheme, similar to tier-I, without the need for actively choosing a scheme of investment or pension fund manager.
“This will give an additional choice to government sector NPS subscribers. If you want to do something on a conservative basis, you can certainly do that. There is no compulsion on tier-II. It is done voluntarily,” Deepak Mohanty, Chairman, Pension Fund Regulatory & Development Authority (PFRDA) told businessline.
This facility will be extended on consent basis and to opt for the default scheme under tier-II account, the government sector NPS subscribers need to provide consent or a request to the Central Record Keeping Agency (CRA), sources said.
As of September 16, India had nearly 9 million government NPS subscribers (both Central and State government).
Resolving complexity
By extending to tier-II accounts, the facility of default scheme exclusively for government sector subscribers, the pension regulator has sought to solve for the complexities faced by such subscribers in choosing the fund manager and investment fund in such accounts.
“Whatever was available for tier-I in terms of default scheme has now been extended for tier-II accounts and only for government sector”, sources said.
The entire objective of this PFRDA move is to popularise tier-II for government sector with ease of account opening, they added.
Till date the penetration of government sector in tier-II accounts is low.
Default choice
Currently, for tier-II accounts, a subscriber has to decide on the investment choice and fund manager on their own. Now the default scheme is being introduced in tier-II accounts for government sector NPS subscribers.
In the case of government sector, when NPS subscriber opens a tier-1 account, there is a default choice. For them, the fund managers and investment choice are pre-decided under default scheme.
If they want, they can go for it. For default option, there are three fund managers —LIC Pension Fund, UTI Pension Fund and SBI Pension Fund —and contributions from subscribers are equally distributed.
The NPS tier-II default scheme represents a significant step forward in catering to the diverse financial aspirations of the government sector subscribers, according to PFRDA.
This scheme is designed to offer flexibility and convenience, aligning with the unique requirements of the subscribers under the government sector.
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