Informal workers may soon open pension accounts via mobile, make contributions using UPI: PFRDA plan explained
The Pension Fund Regulatory and Development Authority (PFRDA) may soon offer mobile-based pension accounts to help informal workers save for retirement through small, regular contributions, the regulatory body’s chairperson Sivasubramanian Ramann said on Thursday.
The proposed system will allow workers to make pension payments using UPI, potentially making formal retirement savings more accessible to those outside the organised workforce. The informal sector comprises a large portion of workers who do not have have a regular monthly salary or pay income tax.
How the online system will work
Ramann said the pension regulator is exploring the simplified digital process using information already available on the government’s e-Shram database, which contains many of the fields required to open a pension account.
“We are, therefore, looking at how people, who are already registered on the database, can be enabled to open pension accounts through a simple, few-click process on their mobile phones,” he was quoted as saying by PTI.
Subscribers would be able to open pension accounts through a simple, few-click process on their mobile phones. Once the account is opened, they can use UPI to make contributions to it. The service is also envisaged to be available in multiple Indian languages to make pension products easier to understand and access.
PFRDA has already launched NPS Tatkal, which operates through UPI providers, as part of efforts to create a more accessible pension system.
Guaranteed-return pension product
Additionally, the pension regulatory body is working on a guaranteed-return pension product for the non-government sector, as mandated under its Act.
“We have to work on a guaranteed-return scheme because there is a mandate under our Act,” Ramann said, adding that an expert committee has been constituted to examine possible products.
However, a key challenge is determining who would provide the guarantee, unlike the Unified Pension Scheme (UPS) for government employees, which has a built-in guarantee mechanism.
NPS Swasthya to be launched soon
PFRDA is also set to introduce NPS Swasthya, a facility that will allow subscribers to use a portion of their accumulated pension savings towards hospitalisation expenses. Meanwhile a linked top-up insurance facility would cover the remaining amount, according to the news report.
The executive also said the top-up insurance could be roughly eight to ten times the initial contribution. The pilot for NPS Swasthya was conducted with two pension funds, while all pension funds should eventually be able to offer the product through tie-ups with insurance companies.
The final guidelines are expected to be issued in the next few days and the product likely to be rolled out shortly thereafter.
On the investment front, Ramann said pension funds are already allowed to use equity and interest-rate derivatives to hedge their existing holdings, subject to the applicable investment guidelines. The regulator is now exploring innovative bond issuances that could help deliver inflation-protected outcomes for guaranteed pension products.
Meanwhile, Bank of Baroda has received in-principle approval to establish a pension fund. Four new pension funds have also been added to the existing 10, taking the total to 14.
“We have already mentioned this. Bank of Baroda has submitted its application, and in-principle approval has been provided. They should now be in the process of setting up the pension fund. We have four new pension funds in addition to the existing ten pension funds,” the executive said.
(With inputs from PTI)
