NEW NPS, EPF RULES: TIME TO TEST YOUR RETIREMENT PLAN?

India’sretirement landscape is abuzz with a series of new developments. Several recent announcements concerning the national pension system (NPS) and the employee provident fund (EPF) promise to make retirement products less rigid.

- MRIN AGARWAL

Changes to NPS guidelines

Anew Multiple Scheme Framework (MSF) has been introduced under the National Pension System (NPS), allowing pension fund managers (PFMs) to design and offer more than one scheme across asset classes. Previously, each PFM could offer only a single common scheme per asset class. Under the MSF, non-government subscribers will have a wider choice, including high-risk options that can allocate up to 100% of assets to equity, asignificant shift from the earlier 75% cap. The framework also permits more flexible asset allocation.

Thenewschemes come witha minimum vesting period of 15 years, after which subscribers may exit at 60 or upon retirement, replacing a structure that locked funds until 60. For long, the lock-in period wasa deterrent. While a 15-year vesting may sound more appealing, the requirement to annuitize 40% of the corpus—asiscurrently the case—will not encourage people to take up the NPS. Under the existing scheme, premature withdrawal can be madeafter five years, with 80% of the amount annuitized. Hence, there doesn’t seem to be much benefit as made out.