The Pension Fund Regulatory and Development Authority (PFRDA), which regulates the National Pension System (NPS), has recently added Max Pension Management Ltd, established in 2022, as one of its 11 pension fund managers. In an interview with this reporter, Ranbheer Singh Dhariwal, chief executive officer of Max Life Pension Fund, spoke on different facets of retirement planning and why people should use NPS for savings and not merely as a tool for tax saving.

Also Read: How Is Tax Evasion Different From Tax Avoidance: Know The Consequences

Here are the edited excerpts from the interview.

How well are people financially prepared for retirement, and what role can NPS play? 

Ans. As per our India Retirement Index Study (IRIS), 90 per cent of people regret not having started saving early. A significantly large population do not think about retirement till they reach 50. So, there is a need, market, and scope for retirement products. While one can never be 100 per cent ready, they should be prepared to tackle the challenges. In my view, NPS can be the best product as it is the most affordable savings tool for retirement. What we need to change is the mindset. Only after people see the need and start saving will the problem be solved. Another priority is to digitize the retirement products to ensure greater access and convenience in the onboarding process, like communicating in the local language, etc., which, along with awareness about retirement planning, will go a long way in making a difference.

What should subscribers consider before selecting an NPS pension fund manager?

Ans. Earlier, you could choose only one PFM, for equity, corporate, and government investment tools. Now, there could be a scenario where one PFM has been managing excellent in equity, some  are excellent on the corporate side, some doing very well on the government side, and some on the alternate investment side. The flexibility that was missing earlier is now available. As a subscriber, I have full visibility on the returns for the last 3-4-5 years. I can decide now who would manage my equity portfolio, government portfolio, and so on. So, from that perspective, it is very good. People would buy this, looking at the returns, stability of the portfolio, and how well the pension fund is performing in providing them stable, steady, and healthier returns.

As far as the portfolio is concerned, it is defined by the regulator. So, within that, if somebody wants to look at it, they can, but investment in the top 200 is allowed in equity. The only difference between one PFM and another is the timing and which top 200 they have opted for.

Also Read: NPS Grievance: How Can You Escalate Your Concerns To Higher Authorities?

NPS has raised the entry age to 70,how will it benefit people? 

Ans. There are a lot of self-employed people who do not have a defined retirement age. Today, the retirement age is defined keeping in mind the corporate sector, who have 58 or 60 years as retirement age, but there is a huge corporate unorganised sector where the retirement age is not defined. There are also scenarios where you have retired but get a stream of income because you are associated with companies as a consultant, director, etc. So, there is a stable income, and you may not want to retire at 58 or 60. So, for those customers who do not want to retire at 58 or 60 and wish to continue, this is a fantastic benefit, and they can keep adding.

What is the most popular pension plan option?

Ans. Joint life with return of purchase (ROP) is the most popular. I recommend joint life with ROP, and if not, then single life with ROP. But again choosing an annuity option depends on every individual’s case. If they do not have anybody to leave with the ROP to, they may rather go for the non-ROP. So, it is very subjective.

How useful be NPS from tax perspective as the benefits are only in the old regime?

Ans. As long as we can position NPS as a retirement product and create awareness about retirement and the need to save for retirement, the tax benefit will not play and rather should not play a major deterrent. If tax planning is the ultimate objective, there are various other ways. In the earlier scenario, you could get tax benefits along with retirement planning, which was the icing on the cake, but that does not mean you would not eat the cake if there is no icing.

On the other hand, a deduction of 10 per cent of the basic salary for a corporate employee is still available in the new regime. An additional deduction of Rs 50,000, available in the old regime, is not available in the new one.

Should this additional benefit of Rs 50,000 be extended to the new tax regime? 

Ans. We can only ask for that and make a recommendation. But yes, globally, there are tax benefits on pension products that motivate everybody to participate. This issue will continue if you associate it only with tax benefits. However, one can overcome the issue because everybody needs to save for retirement, whether self-employed or salaried.

Also Read: PFRDA Issues Consolidated Tariff For NPS PoPs: Know Charges For Subscribers

What are your plans for people’s higher participation in NPS?

Ans. We are one of the younger players in the industry. We plan to make the process very simple and use digital as a medium to increase its penetration. Digitisation is the key to onboarding, simplifying, and creating awareness among people. So we can bring the flavour to the servicing, awareness, onboarding, and experience side.