NSDL e-Governance is the central record-keeping agency (CRA) for the NPS. The company is the CRA of the subscriber data and provides a unique and portable Permanent Retirement Account Number (PRAN).
In view of the meltdown in the stock markets due to Coronavirus crisis and recent bad news from the mutual funds industry, scores of investors are worried whether National Pension System (NPS) is a safe investment option in these troubles times. However, experts believe that NPS is a safe option during or after the Coronavirus period. Amit Sinha – Executive Vice President, NSDL e-Governance Infrastructure Ltd, told FE Online, “NPS, is intended and designed for retirement planning wherein you decide to invest for getting pension during the old age. For retirement planning, besides the investment amount, ‘start early and stay invested for long’ are two important factors which will enable a subscriber to accumulate sufficient corpus for pension.”
Sinha noted that financial meltdowns likely to be experienced in long-term investments. However, flexible options under the NPS can help the subscribers manage their wealth properly. “While considering such a long tenure of investment, financial meltdowns like these are likely to be experienced. It has happened in the past and it may happen in future. With flexible options for investment available in NPS, during the accumulation phase, the subscriber can manage his investments by choosing the appropriate asset mix considering the factors such as age / market situation / risk appetite etc. Hence, NPS as an investment option has nothing to do with pre and post-pandemic scenarios,” said.
Is there a mechanism to protect the wealth of investors under NPS?
Sinha said that NPS is a regulated product. Detailed and comprehensive Investment guidelines have been issued by PFRDA to protect the interest of the Subscribers. “The performance of the pension funds are strictly monitored by PFRDA and NPS Trust to ensure compliance of the stipulated investment guidelines.”
Further, under NPS, investments are not restricted to Equities, but also diversified to other Asset Classes i.e., debt instruments such as Government Securities, Corporate Bonds, etc.
“As far as the subscribers are concerned, choice of investment pattern has been made available in NPS with the option to change asset allocation twice in a financial year and the pension fund once in a financial year. Hence, the Subscribers have an option to change the allocation as per market conditions & their risk appetite,” Sinha said.
He added that the “perception of subscribers may be different and accordingly, the subscribers can have exposure which vary from 0 % to 75 %. Even at the time of exit, options of deferment of lump-sum/Annuity and continuation are available in NPS, to avoid forceful withdrawal at the time of unfavourable market conditions.”
Sinha said that NPS needs to be seen as a long term product and the accumulation phase is spread over two to three decades. “During this horizon, there may be market fluctuations. During the last 10 years, though there were situations of financial meltdown, the last ten years return in NPS (‘’NPS returns since inception’’ is available on the NPS Trust website) proves that short term movement of financial market is not right way to judge the performance of a long term financial product.”
NSDL e-Governance is the central record-keeping agency (CRA) for the NPS. The company is the CRA of the subscriber data and provides a unique and portable Permanent Retirement Account Number (PRAN). It allows Mutual Fund accounting and Pension Fund accounting for all accounts.