After mutual funds, insurers and stock markets, pension funds are also witnessing a good inflow into their kitty. The Pension Fund Regulatory and Development Authority of India (PFRDA), which manages the National Pension Scheme (NPS), has reported inflows of close to Rs 56,000 crore during 2016-17.
“NPS corpus has increased by 47 per cent to Rs 1,74,000 crore in 2016-17. The number of subscribers has also increased by 27 per cent. Around 37 lakh new subscribers joined the scheme last year. Out total subscriber base is now 1.54 crore,” PFRDA Chairman Hemant Contractor said. This indicates the losing glitter of traditional investment avenues like gold and real estate and the emergence of financial instruments.
Contractor said around 1,000 corporates signed up for the scheme last fiscal. “We have 3,800 corporates under the scheme now. We expect more subscribers to join in the current fiscal as well. We hope to maintain the trend in inflows in the year 2017-18,” Contractor told The Indian Express.
A host of factors contributed to the surge in the NPS kitty. “First of all, the market is doing well. In the case of NPS, 16 per cent is invested in equity. Then the Rs 50,000 additional tax exemption for investment in NPS has attracted people. Interest rates have been falling,” Contractor said.
In 2016, the government decided to provide tax benefit on 40 per cent of withdrawal amount at the maturity of any NPS scheme. Till then, while the PF money with Employees Provident Fund Organisation (EPFO) enjoyed EEE (exempt, exempt, exempt) status, NPS withdrawal was under the category of EET (exempt, exempt, tax). At the time of normal exit, 40 per cent of the total corpus was mandatorily required to be purchased for annuity. In 2017, the government allowed exemption on partial withdrawal not exceeding 25 per cent of the contribution made by an employee.
Pension funds are still under different regulators. The demand of the PFRDA to bring all pension funds under the PFRDA umbrella is yet to find a solution. NPS and Atal Pension Yojana are regulated by PFRDA, pension schemes of insurers are under the purview of insurance regulator IRDA and pension funds of mutual funds are under Sebi. “A committee has been appointed to look into this… nothing has been decided,” Contractor said.
Financial instruments like mutual funds, insurance schemes and pension have attracted huge inflows in FY17, sources said. “Gold demand is down and the metal lost some charm. Besides, the focus on digitisation and the government’s move to discourage the cash economy also had some impact in real estate losing charm,” said an official.
The mutual fund sector witnessed a jump of 35 per cent or 4.76 lakh crore in its assets under management (AUM) during the year on the back of continuing strong inflow of funds into debt and equity schemes from retail investors and a sharp rise in stock markets in the last quarter of FY17. The Association of Mutual Funds of India (AMFI) data shows that while the AUM rose from 13.5 lakh crore in March 2016 to 18.29 lakh crore in March 2017. After struggling in the last a few years, the life insurance industry has recorded a significant growth of 26 per cent in total new premium at Rs 175,021 crore in 2016-17.
Gold demand for 2016 fell 21 per cent to 675 tonnes, the lowest annual consumption in the last seven years.