There is a need for regulatory bodies such as the Pension Fund Regulatory and Development Authority (PFRDA) and the Employees’ Provident Fund Organisation (EPFO) to collaborate and build synergies to address the roadblocks in the growth of pension fund corpus, according to Rahul Bhagat, CEO of DSP Pension Fund.
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Speaking at an event on Tuesday, Bhagat said that a provision was made to the government allowing superannuation and provident fund transfers to the National Pension System (NPS), but the execution never took place due to different regulators overseeing various aspects.
He also pointed out that when people want to onboard NPS, there are multiple Central Recordkeeping Agencies (CRAs). “While the ecosystem is evolved, it is not talking to each other,” he said adding that communication and awareness are also needed as people don’t understand the concept of annuity and its importance of it.
Under the current regulations of PFRDA, the funds are only allowed to invest in the shares of the top 200 stocks on the exchanges, based on market capitalization. Ramneek Kundra, chief investment officer of the fund, believes that this limit will gradually be increased to 500 stocks.
Further, Bhagat said that under current regulations, as assets under management increase, the fund will earn less, which he called a huge challenge, as investment in systems and talent can not be made. While the younger generation is investing for the tax benefit there needs to be more awareness about market-linked products compared to traditional ones, he added.
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DSP Pension Fund Managers projects a substantial growth in India’s pension AUM, estimating a total of Rs 118 trillion by 2030, with the NPS expected to constitute approximately 25% of this total. Currently, India’s pension market is significantly under-penetrated, representing only 3% of the country’s GDP, a press release by the fund said. “The retirement savings gap is expected to widen annually by 10%, potentially reaching approximately $96 trillion by 2050.”
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