The upper age limit for joining the National Pension System (NPS) has been raised to 65 years from the current 60, the Pension Fund Regulatory and Development Authority (PFRDA) announced on Monday. PFRDA Chairman Hemant Contractor made the announcement at a conference here on “Transferring Superannuation Funds to National Pension System” and said the pension regulator’s board had already approved the change and it would be notified shortly. “NPS currently open for people between 18 and 60, and our Board has approved raising the age limit for joining to 65,” Contractor said. “The scheme anyway has the option of continuing and making contributions up to the age of 70,” he added.

Explaining that the rationale behind government reforms in pensions is to facilitate “portability” — or the transfer — of superannuation funds by making the NPS more attractive and customer-friendly, he said the measures designed to give the pension scheme an “unbundled architecture to make it as competitive as possible”. “The aim is to open up pensions to sectors that without pensions,” he said, noting that only 15-16 per cent of employees in India covered by pensions because an overwhelming 85 per cent of the workforce found in the unorganised, or “informal”, sector.

Elaborating on the benefits of the NPS, Contractor said it is the “lowest-cost pension product in the world today”. “Costs are important because even one per cent difference in cost over 25-30 years, makes around 15-16 per cent difference at the end because of the compounding factor.” “Our fund management charges are a miniscule 0.01 per cent… the lowest, when you compare others charging 0.4 or 0.5 per cent,” he said, adding that the NPS returns compare with the “best in the industry”.

Central Board of Direct Taxes

The regulator also said that PFRDA had asked the Central Board of Direct Taxes (CBDT) to provide a blanket approval for the transfer of superannuation funds to the NPS, but was still awaiting a response from the CBDT. He suggested that companies should individually take up this matter with the CBDT, as the PFRDA is yet to hear from the income tax department. Contractor explained that NPS enjoys special privileges on income tax that are not available to any other capital market instrument.

NPS has emerged as a scheme for income security of senior citizens, said the PFRDA Chairman adding that it had seen “good growth over the last one-two years”. “Last year, the individual schemes grew by over 100 per cent,” he said. There are various investment options available to an NPS subscriber ranging from equity and secure government bonds to life-cycle funds. Equity investment of a subscriber’s funds can go up to 75 per cent of their contribution if one chooses the life-cycle fund. It also offers less risky options with a heavy component of fixed income investment.