Deepak Mohanty, chairman of the Pension Fund Regulatory and Development Authority (PFRDA) delivered an insightful address at the third edition of Outlook Money’s 40After40 Retirement Expo, currently underway in Mumbai.
PFRDA chairman Deepak Mohanty emphasised on the significance of NPS in ensuring long-term financial stability
Deepak Mohanty, chairman of the Pension Fund Regulatory and Development Authority (PFRDA) delivered an insightful address at the third edition of Outlook Money’s 40After40 Retirement Expo, currently underway in Mumbai.
He emphasised on the value of incorporating pension plans into individual savings strategies, saying they are a financial requirement rather than only an optional addition. Giving an example with a balanced Indian thali, he said, “A pension should be a part of every savings portfolio, just as essential ingredients are to a wholesome meal.”
He spoke of the importance of early retirement planning, noting that pensions provide long-term financial security for individuals and their spouses, which is a vital factor in today’s socio-economic landscape.
Mohanty highlighted some critical challenges that make pension planning more urgent today.
First was the rising longevity in India. The share of people aged 60 and above are expected to increase from 10.5 per cent in 2022 to about 20.8 per cent by 2050. “As life expectancy continues to rise, the need to plan for longer retirement periods is becoming more essential,” he said.
He also raised concerns about increasing dependency, with the older dependency ratio expected to rise from 18 per cent in 2020 to 30 per cent by 2050, which could exert considerable pressure on the younger population and financial resources.
Mohanty remarked on how a well-designed pension plan may help manage the growing costs of ageing-related medical care. He also spoke about the changing family dynamics, where elderly parents are no longer solely dependent on their children, thus stressing on the need for financial independence in retirement.
Mohanty described the National Pension System (NPS) as a flexible, low-cost, market-driven approach designed to meet the different demands of the people. Since its launch in 2004, NPS has revolutionised pension accessibility in India by providing benefits to people in the private sector, gig economy workers, government employees, and now even children through NPS Vatsalya.
“One of the key strengths of NPS is its flexibility. Whether you’re a 20-year-old just starting your career or a 70-year-old planning for your future, NPS is for everyone,” Mohanty said.
In order to customise the investing plan based on age and risk tolerance, NPS gives customers the option to select between active and auto choice for asset allocation. NPS is even more accessible due to its low entrance barrier, which makes it a good choice for people with inconsistent earnings, he added
He said NPS subscription has seen a significant growth, with both individual customers and organisations adopting it. At present, it has over 16 million users and Rs 13.4 trillion in capital. Mohanty pointed out that despite these advancements, the adoption rate is still lower than anticipated, especially in the private sector, which indicates the need for more awareness.
In his closing remarks, he underscored the significance of expanding pension coverage, particularly for India’s unorganised labour sector. He also noted global difficulties that nations in the Asia-Pacific area have when it comes to increasing pension coverage. “There is a pressing need for more widespread adoption of pension plans to ensure that every individual has a secure financial future,” he further said.