Corporate NPS Adoption Gains Momentum Under New Tax Regime: HDFC Pension Witnesses Surge

National Pension Scheme (NPS) Sees Growth Across Various Segments

Roughly 30 percent of the assets under management by NPS come from government business. The remaining portion is almost equally divided between retail and corporate NPS. Government business for NPS does not come automatically; instead, the organization has teams that conduct awareness sessions and engage with government employees and institutions. Those employees have the option to move from default schemes to private pension fund managers.

Retail growth for NPS is largely organic, benefiting from the organization's brand and long-term performance. Since inception, NPS has consistently remained among the top performers across asset classes. Apart from that, social media campaigns and digital marketing activities bring customers to the organization's platform. Distribution channels and points of presence also contribute significantly to the growth.

Multi-Scheme Framework (MSF), a recent launch by NPS, provides flexibility in terms of asset allocation for retail investors. MSF allows for products ranging from 100 percent equity exposure to debt-oriented structures. Fund managers can also dynamically adjust allocation based on market conditions. The biggest advantage of MSF is the ability to customize products for specific customer segments, which has been in high demand.

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NPS offers several advantages over mutual funds, particularly for salaried individuals. One of the biggest advantages is that contributions happen from pre-tax income, allowing individuals to start with a larger investable amount compared with post-tax investments. There are also benefits of lower costs and tax advantages at maturity, as well as a lump-sum component received at maturity that is tax-free.

The product has evolved considerably compared with how it was perceived earlier. Subscribers now have greater withdrawal flexibility and portability, and people can also move between corporate and retail structures.

Today, NPS manages close to 5,000 corporates and adds approximately 100–120 corporates every month. Industry-wide, the number of corporates participating in corporate NPS has increased substantially, moving from approximately 10,000 in March 2022 to nearly 23,000–25,000 now.

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The new tax regime has certainly accelerated corporate NPS adoption, with fewer tax deduction opportunities available under the new regime making corporate NPS more relevant. Additionally, NPS has invested significantly in distribution capabilities and resources.

NPS is also approaching the gig economy opportunity by creating a framework where platform aggregators can facilitate retirement savings without being treated as employers. Delivery partners can choose contribution amounts such as Rs 50, Rs 200, Rs 300, or Rs 400, which gets deducted from their weekly settlements and invested into their pension accounts. The idea is to provide long-term retirement security while keeping the contribution process simple and flexible.