Fresh NPS adoption by companies rises 9% in December, shows NSO data

The adoption of the National Pension System (NPS) by formal sector employees in corporate rose by Rs 9 per cent in December as compared with the previous month, according to the data released by the National Statistical Office (NSO) on Friday. The addition of new monthly subscribers under the corporate segment stood at 8,420 in December from a 34-month low of 7,728 subscribers in November.

The corporate component of the scheme is voluntary in nature and includes people working in public sector organisations, private limited companies or public sector banks, among others.

The corporate segment of the scheme has witnessed a decline in recent months as the new tax regime, unlike the old scheme, does not provide incentives to invest in the pension scheme. Employees in the corporate sector, who earned up to Rs 7 lakh, could save taxes by investing in the NPS.

This slight uptick in new corporate subscribers comes as Pension Fund Regulatory and Development Authority (PFRDA) chairman Deepak Mohanty prodded banks to shore up fresh enrolments to achieve the ambitious target of enrolling 1.3 million new subscribers under the private sector of the NPS in the current financial year (FY 24).

The cumulative number of fresh subscribers that adopted NPS – comprising central and state governments’ employees, as well as corporate sector employees - declined to 77,656 in December from 108,057 in the previous month.

While the number of central government subscribers increased to 18,140 in December from 16,737 in November, the number of fresh subscribers under the state government component declined to 51,096 from 83,592 in the corresponding period.

The Union government has mandated the NPS for all its new employees, hence, this can be used to gauge fresh recruitments at the central level. However, states of Rajasthan, Chhattisgarh, Himachal Pradesh, Jharkhand and Punjab have announced plans to return to the Old Pension Scheme (OPS), hence NPS cannot be used as an exact metric to gauge hirings at the state level.

Managed by the Pension Fund Regulatory and Development Authority (PFRDA), the NPS is designed on a defined contribution basis. Here, both the subscriber and the employer contribute an equal amount to a person’s account. It was made mandatory for all new central government employees from January 1, 2004, except the armed forces.

Since April 2018, the National Statistical Office (NSO) has been bringing out employment-related statistics in the formal sector, using information on the number of subscribers under the Employees’ Provident Fund Scheme, Employees’ State Insurance Scheme, and the National Pension System.