Custom Pension Products On The Horizon As PFRDA Weighs $175 Bln Industry Revamp: Report | Banking and Finance News

Bespoke Retirement Plans May Reshape India’s $175 Billion Pension Market

Bespoke pension products by fund houses may soon become a reality in India, in what could mark a sweeping overhaul of the $175 billion retirement savings industry, Bloomberg reported citing people familiar with the matter.

A bespoke plan, unlike preset plan, would give pension houses freedom to design their own products — for example, one plan could be more aggressive (higher equity), another could be conservative (more debt), or even targeted for specific groups (like women or young professionals).

According to the people, the Pension Fund Regulatory and Development Authority (PFRDA) has already discussed the possible changes with fund managers on multiple occasions.

Because their funds are currently spread across four asset classes—equities, corporate debt, government securities, and alternative investment funds—retirees under the National Pension System currently have very little flexibility.  According to Bloomberg, fund managers at companies like ICICI Prudential Pension Fund and SBI Pension Fund Pvt. Ltd. generally follow the asset mix required by the PFRDA.

The new framework, if approved, could allow pension fund houses to offer products that reflect varying investor preferences and risk appetites. Bloomberg reported that one possible offering under discussion is a pension plan specifically aimed at women.

The proposal may also open the door for slightly higher fees, as fund houses intend to pass on increased marketing costs to customers, according to Bloomberg.

In recent years, the industry has been attracting greater foreign participation through joint ventures. Around four years ago, the PFRDA lifted the cap on foreign direct investment in the pension sector to 74% from 49%, Bloomberg said.