The number of new subscribers to the National Pension System (NPS) has declined by around 50 per cent from 110,665 new subscribers in April 2024 to 54,869 in August 2024, according to data in the Payroll Reporting in India: An Employment Perspective –August 2024, report.

According to the report issued by the Ministry of Statistics & Programme Implementation (MoSPI) last week, the decline was almost 13 per cent, compared to the previous month, that is July, 2024.

NPS is one of the social security schemes available to all Indian citizens, including non-residents.

Despite more awareness about the scheme, there is a declining trend in the number of new members.

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According to the MoSPI data, the new subscriptions have been constantly declining this financial year. The new subscribers since April have been:

April 2024 - 110,665

May 2024 - 79,080

June 2024 - 64,799

July 2024 - 62,880

August 2024 - 54,869

However, the Pension Fund Regulatory and Development Authority (PFRDA) data as of September 14 shows a year-over-year (y-o-y) growth of 12.11 per cent in the total number of subscribers (both existing and new), including government, corporate, and all citizens model subscribers.

These data points from MoSPI and PFRDA suggest that while the number of subscribers is increasing, the number of new subscribers is witnessing a declining growth rate.

Social Security Schemes In India And The Pension Coverage

In India, despite prominent social security schemes, such as the Employees’ Provident Fund (EPF), Employees’ Pension Scheme (EPS), and National Pension System (NPS), pension coverage remains inadequate.

According to Niti Aayog’s position paper, Senior Care Reforms In India, Reimagining the Senior Care Paradigm, in February 2024, around 70 per cent of the elderly population in India depend on others for daily expenses, and 78 per cent do not have any pension cover.

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So, what is the reason behind the gap in the supply of pension schemes and the lack of coverage?

Primary Reasons Behind The Slowing Trend: The recent IRIS 4.0 study by Max Life answers this question to an extent. 

According to the survey, which covered people in 28 cities (including metro, Tier-I, and Tier-II), many are aware of NPS, but have not invested in it. The report shows that in metro cities, 71 per cent are aware of NPS, but only 13 per cent have invested in the scheme. In Tier-II cities, 78 per cent are aware, with 25 per cent investing, while in Tier-I cities, only 20 per cent have invested despite the awareness.

In the last few years, NPS has managed to receive attention due to its tax benefits, low cost, returns, and lifelong pension security, and also because PFRDA has made several amendments to NPS rules making it more flexible to suit people’s varied needs over the years.

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Is Awareness The Only Answer To Reverse Declining Trend Of New Subscriptions?

According to the IRIS report, while more than 90 per cent of people consider NPS a ‘Trusted and safe product’, and a ‘Hassle-free and worry-free’ product, 75 per cent of people look at it as a ‘Complicated’ and ‘Low liquidity product’.

Lack Of Understanding: Lack of complete understanding of the product (NPS) and lack of handholding support throughout the process of investing in NPS are the primary reasons for not investing in NPS, according to the study. 

In cases where NPS is mandatory, such as for central government employees and in states where no other pension scheme is running, enrollment is not a concern. 

But in corporates and in all-citizen models, in which it is optional, increasing the number of new subscribers remains a concern, as there appears to be a lack of complete understanding of the product among people. 

Other Instruments: A few other reasons are people saving in other instruments, not believing the NPS payout promises, and thus delaying their investment, thinking this is not the right time to invest in the scheme.

Lack of Handholding: Further, there seems to be a gap in the way the scheme is being offered and how people want it. According to the report, better handholding can help in NPS ownership.