At least two major banks have already submitted applications to enter the pension fund business, indicating strong future growth potential, Pension Fund Regulatory and Development Authority (PFRDA) chairman Sivasubramanian Ramann has told Moneycontrol.
Their move signals increasing confidence among large financial institutions in the long-term prospects of pension fund management, he added.
Several large banks that currently do not operate pension funds have made enquiries to enter the pension fund business. The growing interest from big banking players reflects the expanding opportunities in the pension space as participation widens, Ramann added.
Edited excerpts:
How do you assess the overall response to equity participation, and will equity AUM reach a new high in FY26?
Equity AUM is certainly on track to reach new highs. Over the last six months, contributions have risen nearly 30 percent, but because equity markets softened during this period, the AUM increase has been relatively modest at 16–17 percent. Despite market volatility, the strong growth in contributions is very encouraging and reflects rising investor confidence in equity exposure within pension schemes.
What is the current status of equity allocation in pension schemes?
Since April, equity allocation has been permitted up to 25 percent. At present, the overall equity exposure stands at about 18 percent across schemes. Some schemes with 100 percent equity exposure are performing particularly well, and the pickup in these schemes has been excellent.
What share do 100 percent equity schemes hold in the overall portfolio?
The share of pure equity schemes is currently very small in the overall pie. This is mainly because integration with the CRA is still being completed. New schemes require digital system upgrades, and this re-engineering process is nearing completion. Full operational readiness is expected within 10 days, after which smoother digital flow is expected.
How important is digital integration for distributors and pension funds?
Digital integration is critical, especially for distributors that are not pension funds. For example, large banks acting purely as distributors depend heavily on digital connectivity to onboard customers efficiently. The CRA systems are being integrated to enable this, and overall enthusiasm among pension funds and distributors is extremely high.
What incentives have been introduced for distributors and pension funds?
An additional 0.1 percent incentive has been offered if 80 percent of customers are new to the scheme. This threshold has not yet been achieved, but once business gains momentum, pension funds are expected to actively pursue this incentive. The intent is to push customer acquisition, not just asset growth.
What new outreach initiatives are being launched, especially for MSMEs?
Five verticals have been created for expansion: Corporate, MSME, FPOs, SHGs, and Platform/Gig Workers.
For MSMEs specifically, partnerships with PwC and KPMG cover 12 states, with 100 clusters in each state. This 12-month program will hold extensive events, and officials will stay in each location for 3–4 days to convert outreach into actual enrolments.
Are there any internal targets for MSME participation?
At present, no specific numerical targets have been issued. The focus is on capacity-building first, after which measurable targets may be introduced.
What growth is expected in contributions and AUM this year?
Since contributions have already grown 30 percent, a similar growth rate is expected in the second half of the year as well. As for AUM, it will depend on market movements, but overall growth of around 30 percent for the fiscal year is considered achievable and conservative.
What is the Structured Withdrawal Product (Structured Payout) and its timeline?
Structured payout is intended to provide a systematic pension-style withdrawal from retirement corpus. Currently, the SLW (Systematic Lump-sum Withdrawal) is operational only on the tax-free 60 percent portion. Revised exit regulations will soon allow only 20 percent mandatory annuity, instead of 40 percent, and structured payouts will operate on the remaining 40 percent.
The structured product is expected to be launched within the current financial year, after pension funds build operational capacity.
What is the regulator’s view on investment in alternative assets like REITs, InvITs, gold and silver?
Investments in REITs, InvITs, AIFs, gold and silver ETFs fall under a combined 5 percent alternate asset cap. These assets are considered relatively low-risk and suitable for long-term pension investments. Gold and silver ETFs are likely to be permitted within this limit.
Is there interest from new pension fund applicants?
Yes. Several large banks that currently do not operate pension funds have made enquiries. At least two major banks have already submitted applications to enter the pension fund business, indicating strong future growth potential.
What is the status of the Unified Pension Scheme (UPS) rollout among states?
UPS is currently operational for the central government only.
Eight states have issued notifications but contribution rates will be finalized only after actuarial modelling.
Each state’s employee demographics, pay scale and longevity must be studied before fixing contribution rates.
What is being done for gig workers and platform workers?
Transaction charges have been completely removed, allowing even Rs 20-30 daily contributions. Discussions are also underway with major UPI platforms to integrate pension payments digitally, making NPS as easy as making everyday UPI payments.
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