Millions of workers outside India’s organised workforce could soon get an easier route to building a retirement corpus, with the Pension Fund Regulatory and Development Authority (PFRDA) exploring mobile-based pension account opening and UPI-enabled contributions. PFRDA chairperson Sivasubramanian Ramann said the regulator is examining a simplified digital mechanism that could allow informal workers to start pension accounts directly from their mobile phones. The initiative is to make retirement savings more accessible to workers who may not have a fixed monthly salary or regularly pay income tax.
The proposed system could use information already available through the government’s e-Shram database, potentially reducing the paperwork and friction involved in opening a pension account.
Under the proposed system, eligible workers registered on e-Shram could potentially use their existing details to open a pension account through a simple digital process.
“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.
Once an account is created, subscribers would be able to add money to their pension savings using UPI. The regulator is also considering offering the facility in multiple Indian languages, which could make pension products easier to understand for workers who may otherwise find formal financial products difficult to navigate.
PFRDA has already introduced NPS Tatkal, which enables pension-related transactions through UPI providers. The proposed mobile-based system would build on the regulator’s broader push towards simpler digital access to retirement savings.
PFRDA Works On Guaranteed-Return Pension Product
Alongside the digital pension initiative, PFRDA is developing a guaranteed-return pension product aimed at subscribers outside the government sector. The regulator is required to work on such a product under its statutory mandate. An expert committee has been constituted to examine possible models and determine how such a scheme could be structured.
“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.
One of the major issues is expected to be the mechanism for providing the guarantee. Unlike the Unified Pension Scheme (UPS) available to government employees, the proposed product for non-government subscribers does not have an equivalent built-in guarantee structure.
PFRDA is also looking at new investment avenues, including innovative bond issuances that could potentially help generate inflation-protected outcomes for future guaranteed pension products.
NPS Swasthya To Offer Support For Hospital Expenses
Another pension-related initiative nearing rollout is NPS Swasthya, which is designed to give subscribers access to a portion of their accumulated pension savings for hospitalisation-related expenses.
Under the proposed facility, a linked top-up insurance product would provide additional coverage beyond the amount available from pension savings. According to the report, the insurance top-up could be around eight to ten times the initial contribution.
A pilot of NPS Swasthya has already been conducted with two pension funds. The regulator eventually expects all pension funds to be able to provide the facility through partnerships with insurance companies.
The final guidelines are expected shortly, following which the product could be launched.
PFRDA Expands Pension Fund Ecosystem
The pension regulator is also widening the number of entities operating as pension funds. Bank of Baroda has received in-principle approval to establish a pension fund.
Four new pension funds have been added to the existing 10, taking the overall number to 14 pension funds.
“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)