Independent Research and Policy Advocacy

NPS Lite: Securing Old Age Income

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Abstract

The announcement of National Pension System (NPS) Lite, a pension plan geared towards economically disadvantaged populations, brings hope for much needed money during non-productive years. By offering a pension plan for low-income individuals, the Pension Fund Regulatory and Development Authority (PFRDA) has provided a mechanism by which the elderly poor can smooth consumption at a time in their lives when they typically rely on family members.

PFRDA’s pension plan is accessible and affordable. NPS Lite will be offered through aggregators – such as NGOs, MFIs and NBFCs – that already work with economically disadvantaged communities. The plan makes small individual investments possible by availing group platforms through aggregators. This structure allows for low administrative and transactional costs; thereby facilitating low contribution requirements.

The success of the NPS Lite pension scheme relies heavily on high quality aggregators, and IFMR Finance Foundation (IFF) presented recommendations pertaining to this aspect to PFRDA. Given the important role aggregators play as the interface between customers and NPS architecture, PFRDA has provided regulations addressing multiple aspects of operation. For instance, aggregators must have three or more years of experience working in financial services or commodity development, must adhere to ‘Know Your Customer’ requirements, and are not authorized to collect fees for their services to the customer.

NPS Lite is an important step along the path of total financial inclusion. The scheme offers savings to a population that typically does not have resources for their non-productive years. However, it is imperative that the scheme is well organized and maintained, so that the most deprived populations can reap the benefits of their working years later in life.

For more details on NPS Lite regulation, view the Regulations for Aggregators Under NPS Lite-2010 document.

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