NPS: The T+0H scheme, introduced in July, has received positive response by providing subscribers with the Net Asset Value (NAV) of the day they invest. Currently, 30 percent of investments are made using this scheme.

Subscribers looking for higher equity exposure can opt for Tier 2. (Image: Avishek DasSOPA ImagesLightRocket via Getty Images)

New Delhi: The continued rally in the equity market is having a positive impact on the National Pension System (NPS), evident from the significant growth in Assets Under Management (AUM) and improved returns. The NPS equity scheme currently boasts an impressive annual return of 36 per cent, contributing to an AUM milestone of Rs 12.5 lakh crore.

Deepak Mohanty, chairman of India’s pension regulator, Pension Fund Regulatory and Development Authority (PFRDA), reports a recent increase in AUM of Rs 1.50 crore in the past six months. The projected growth suggests that AUM could touch Rs 15 lakh crore by March 2025, with an estimated Rs 3 lakh crore coming from equity if market conditions remain favourable.

Atal Pension Yojana (APY) Review

At a recent review meeting of the Atal Pension Yojana (APY), Deepak Mohanty highlighted a substantial combined subscriber base of 7.5 crore for both NPS and APY. APY, tailored for low-income groups, has attracted 6 crore active subscribers, underlining its popularity and accessibility. Meanwhile, NPS accounts for 1.5 crore subscribers. APY offers a guaranteed return of 9.2 per cent, contributing to its rapid expansion with 1.20 crore new subscribers added in the past year, a significant chunk of whom are women. Notably, 85 per cent of APY subscribers contribute at least Rs 1,000, reflecting broad participation and efforts towards financial inclusion.

Initiatives for expansion

Efforts are underway to raise awareness and extend coverage to informal sectors, allowing subscribers to increase their equity fund investments until they are 45, thereby bolstering their retirement savings. These initiatives are expected to be rolled out in September.

T+0H scheme and future plans

The recently introduced T+0H scheme has received positive response by providing subscribers with the Net Asset Value (NAV) of the day they invest. Currently, 30 percent of investments are made using this scheme. Meanwhile, efforts to set up a Minimum Assured Plan are still on, though challenges beyond guarantee issues are slowing down its rollout.

Future considerations

Despite a surge in interest due to its high yields of 36 percent, there are no immediate plans to change the 75 percent equity cap in NPS Tier 1 as it remains popular due to its tax benefits. Subscribers looking for higher equity exposure can opt for Tier 2.