As of now, subscribers having a corpus of over Rs 2 lakh at the time of retirement or attaining the age of 60 years need to buy an annuity, offered by insurance companies, on a mandatory basis. They can take out the remaining 60% as a lump sum.
However, as annuity rates always track the interest rate markets, the returns are in the range of 5-6%. “Most of the annuity providers are giving about 5-5.5 % as returns. And the annuity is taxable. So given the inflation, it is a negative return. We thought why not give them one more choice of retaining that 40% also within our pension fund managers and giving them a better return. We are in talks with our pension fund managers,” PFRDA Chairman Supratim Bandyopadhyay said.
He said the discussions are with the stakeholders including the government and regulators such as Irdai and Sebi because companies under their regulation also offer annuity products. Besides, the PFRDA is also proposing to raise the limit of Rs 2 lakh to Rs 5 lakh as the maximum corpus one can walk away with at the time of retirement or exit of the scheme, without the need to purchase an annuity.
The pension fund managers on board the PFRDA have generated returns of 12.03% in equity schemes; corporate bonds have given 10.02% and government securities 9.66 % since the inception of NPS in 2009. Funds invested in central and state government schemes have generated returns of 9.94% and 9.83% respectively over these 12 years. PFRDA runs two flagship pension schemes—National Pension System (NPS) and Atal Pension Yojana (APY).