In talks with IRDAI for options with returns linked to momentum of price appreciation: PFRDA chief
The head of the Pension Fund Regulatory and Development Authority (PFRDA) indicated on Tuesday that as savers are concerned about the detrimental effect of inflation on their fixed retirement income, they may soon buy indexed annuity products with returns linked to the pace of price appreciation. may be able to.
The pension regulator, which oversees the National Pension System (NPS) with retirement savings of ₹6.76 lakh crore, is working with the Insurance Regulatory Development Authority of India (IRDAI) to provide such an option to its over 4.7 crore members. In which the government is also involved. and private sector employees as well as self-employed and informal sector workers.
“For many people, once annuity income starts up, it remains constant throughout their lifetime,” said Supratim Bandopadhyay, president, PFRDA. “While there is a product that provides a simple 3% annual increase in annual income, it will not take into account the risk of inflation,” he said. “We are talking to the insurance regulator…and annuity providers, can they think of a variable annuity that gives some cushion against inflationary growth,” he said in a statement on reducing the value of annuities over inflation. Said in response to the question. Compulsory income under NPS
‘Panel submitted report’
“They have some working committee on this issue and a report has also been submitted. We are in discussion with IRDA to ensure that such products are launched at the earliest,” he said in a webinar organized by Assocham on NPS benefits for corporates.
Mr. Bandopadhyay is flagging the poor returns offered in annuity products, where NPS members are required to keep 40% of their retirement corpus in lieu of monthly income until their death.
“Suppose one reaches ₹2.1 lakh at the time of retirement, he/she will get an annuity of ₹84,000, which would give an income of ₹400 or ₹450 per month today, which is a nominal… Since annuities are taxable, Tax cuts and factoring in inflation mean annuities are giving negative returns,” he had told earlier this year.
Apart from emphasizing on inflation-indexed annuity product, PFRDA is making legislative changes to drop the condition that 40% of NPS accumulation should go into annuity at the time of retirement.
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