NPS Reforms: The pension sector is set for a major transformation with new reforms approved by the Pension Fund Regulatory and Development Authority (PFRDA). These changes permit eligible banks to establish their own independent pension fund managers. The move aims to boost competition, improve returns for subscribers, and strengthen governance within the National Pension System framework for enhanced transparency.
Eligibility Criteria for Banks
Only Scheduled Commercial Banks meeting strict net worth, market capitalisation, and RBI prudential standards can sponsor pension funds. This ensures only financially robust and fundamentally secure entities enter the sector. The Ministry of Finance states this will foster innovation and benefit customers through increased competition and potentially better retirement outcomes.
New Appointments to Strengthen Governance
In a related development, the NPS Trust Board has seen key appointments to bolster oversight. Former SBI Chairman Dinesh Kumar Khara has been appointed Chairperson. Swati Anil Kulkarni, former Executive Vice President of UTI AMC, and Dr. Arvind Gupta, co-founder of Digital India Foundation, join as trustees. These appointments are seen as crucial for enhancing governance across the pension system.
Revised Fee Structure to Drive Growth
PFRDA has also decided to implement a new slab-based Investment Management Fee (IMF) from April 1, 2026. While fees for some government sector schemes remain unchanged, charges for Non-Government Sector subscribers will be significantly reduced. This step addresses market needs and is expected to help expand NPS penetration in the corporate sector, retail, and the gig economy.
Focus on Equity and Choice
The reforms are designed to make the National Pension System more competitive and resilient. It is important to note NPS does not guarantee fixed returns. Returns are market-linked, based on subscriber-chosen asset allocation. PFRDA currently permits up to 100% investment in equity for higher potential growth, alongside lower-risk options like government and corporate bonds.
