Will MARS Mean The Moon To Retirees?

The pension regulator’s MARS, which envisages delivering minimum assured returns, could give a new fi llip to NPS by drawing more conservative investors into the scheme

- NILANJAN DEY

The minimum assured return scheme (MARS), the pension regulator's version of a scheme aimed at delivering minimum assured returns, is expected to be based on floating rates pegged to 10-year government security. The scheme, spurred by the need to provide an alternative to entirely market-driven performance in the organised retirement sector, will take pension reforms to the next level.

Assured returns will attract a new set of subscribers to the National Pension System (NPS), which stand at the very centre of reforms initiated by the Pension Fund Regulatory and Development Authority (PFRDA) in recent days. The MARS variant, likely to draw serious long-term allocations to the system, will encourage a relatively more conservative section to save for retirement.

In this context, an insight into the concept of floating rates is expected to help subscribers. To be reset periodically, such rates will be a critical driver for all. A number of elements may work in their favour, or against, depending on the circumstances. Retirement planning, to say the least, needs to take cognisance of such factors.

Simply put, the 10-year government securities (G-secs) serve as a crucial barometer for the fixed-income segment to which investors usually refer to in the debt market. It serves as a benchmark for major borrowing rates, with variations in its yield giving serious repercussions for investments.