PFRDA Proposes Guaranteed-Return Pension Scheme; Holds Talks with Finance Ministry

The Pension Fund Regulatory and Development Authority (PFRDA) is in talks with the Union Ministry of Finance on a pension scheme that would offer guaranteed returns.  

As per The Business Standard news report, the proposal is still being discussed, and the rules for managing the risks have not been finalised. 

Derivatives For Hedging 

An assured payout would require pension funds to hedge against market risk. Their access to derivatives for this purpose is currently conditional and limited. PFRDA is discussing the possibility of allowing instruments such as forward rate agreements (FRAs). 

Pension funds do not currently use derivatives. The report citing a source said the regulator is exploring the option with regulators, while the use of FRAs is developing in the industry. Pension funds would also need systems to use such instruments. 

Cost Remains a Factor 

PFRDA has been working on a “Minimum Assured Return Scheme” (MARS) for the National Pension System (NPS), but it has not been launched. The regulator is also examining other assured-payout options for subscribers. 

A source familiar with the development said the proposed scheme would involve a high cost. Keeping NPS low cost is a key consideration for PFRDA, particularly as hedging and other measures needed for guaranteed returns could add to expenses. 

Changes To NPS Rules 

PFRDA has made several changes to NPS rules over the previous and current financial years. In December last year, it raised the lump-sum withdrawal limit at exit for non-government subscribers with savings above ₹12 lakh to 80% of the corpus from 60% earlier. 

The regulator also allowed pension funds to invest NPS assets in commodities. In January, scheduled commercial banks were allowed to independently sponsor pension funds managing NPS assets. 

PFRDA also appointed three new trustees to the NPS Trust Board and set up a panel to examine assured-payout options. Exit rules for NPS Vatsalya, which allows parents to open NPS accounts for minor children, were also eased. 

More Changes In 2026 

In June 2026, annual audits became mandatory for Points of Presence with 10,000 or more subscribers. A revised Central Recordkeeping Agency charge structure took effect in July, including lower charges for dormant accounts and no charges for Tier-II accounts with balances up to ₹1,000. 

At the end of August 2026, PFRDA revised the NPS scheme classification framework and made Life Cycle 50-Moderate the default for subscribers who do not choose a scheme. 

The guaranteed-return proposal remains under discussion, with the risk-management framework yet to be finalised. 

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Conclusion 

PFRDA’s proposed guaranteed-return pension scheme has not been launched yet. Discussions with the Finance Ministry are continuing, including on the risks and costs involved. 

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