As per the Indian pension regulator, Pension Fund Regulatory and Development Authority (PFRDA) new directive, the NRIs or non-resident Indians can now invest in the National Pension System (NPS) to get the necessary social security cover. According to reports in the Indian media, over 11 million NRIs in around 192 countries are set to benefit from the move announced by the PFRDA. Importantly, non-residents especially the Indian immigrants in the Middle-East do not have any mandatory social security benefits.
NPS is a voluntary, defined contribution retirement savings scheme, designed to enable systematic savings during the subscriber's working life. The other noticeable feature of NPS includes, it being a low cost, tax-efficient, flexible and portable retirement savings account. NPS is an attempt towards finding a sustainable solution to provide adequate retirement income, especially to the workers in the unorganized sectors during their old age.
At the time of a normal exit from NPS, the subscribers may use the accumulated pension wealth under the scheme either to purchase a life annuity from a PFRDA empanelled life insurance company or withdraw a part of the accumulated pension wealth as lump-sum.
PFRDA has communicated about the relaxation through the RBI, the central government
will shortly come out with a clarification on Foreign Exchange Management Act
(FEMA) guidelines to facilitate non-resident Indians to invest in pension scheme. Only then, NPS can be added in the list of
permissible investments (under FEMA) for the NRIs.
Till now, though there was a credible procedure for the NRI Pensioners to receive their regular pensions, accumulated for the services in India. However, it is for the first time happening in India, the Indian government is allowing the NRIs to invest in one such scheme.
The eligibility is open to all NRIs, between 18-60 years complying with the Know Your Customer (KYC) guidelines. The minimum contribution at the time of opening the account will be Rs. 500 and the minimum amount per contribution is Rs. 500 per month or Rs. 6,000 per annum. For more details on eligibility, please refer this link - https://www.hcilondon.in/pdf/pension_for_NRIs.pdf
However, the PFRDA Chairman made it clear that “there were no plans to allow Persons of Indian Origin (PIOs) or those with Overseas Citizenship of India (OCI) card to invest in NPS”.
This move will also help in increasing the subscriber base and expanding the pension corpus in the private sector. The current corpus under the NPS is Rs. 91,000 crore. The PFRDA is also reportedly in talks with several consumer banks such as State Bank of India, HDFC Bank, Canara Bank, Indian Bank and various south India-based banks to tap potential of the NRIs.
According to the Ministry of Overseas Indian Affairs (MOIA), India has the second largest population of immigrants living all across the world, with around 29 million people.