'NPS requires more options and innovation, not control'

Built on a defined contribution model, the National Pension System (NPS) was created to meet India’s growing retirement income needs. Since its rollout for non-government subscribers in 2009, the system has evolved steadily.

- Deepti Bhaskaran

The latest reform—the Multiple Scheme Framework (MSF)—permits up to 100% equity allocation, up from the earlier 75% cap. Under MSF, Pension Fund Managers (PFMs) can design and manage multiple schemes across asset classes, giving investors more customised and flexible options to build their retirement corpus.

At the same time, the Pension Fund Regulatory and Development Authority (PFRDA) is working to expand pension payout choices, which are currently limited by a narrow range of annuity products. In this interview, PFRDA chairman S. Ramann discusses the shift from centrally designed products to enabling PFMs to innovate, distribute, and deliver stronger retirement outcomes for India’s evolving workforce. Edited excerpts:

The NPS was originally designed to transition government employees from a defined-benefit to a defined-contribution system, so the early focus was largely on government subscribers.

In that context, the participation from the non-government segment may appear modest.

We've now drawn a clear distinction between the government and non-government sectors, and our priority is to strengthen outreach and distribution for the latter. Since NPS is a voluntary product, expanding awareness and access is critical—and that’s the task we've set for ourselves in collaboration with all stakeholders.

The multiple scheme framework also comes alongside a tenfold hike in fund management fees—from 0.03% (for large fund size) to 0.3%. Is this aimed at addressing NPS's distribution challenge?