Sriram Iyer, MD & CEO, HDFC Pension, talks about the benefits of NPS for corporate employees in an interview with Yasmin Hussain.
What has driven the rise in NPS adoption? How has the subscriber base grown across various segments?
Over the years, NPS penetration has grown significantly across sectors. Many employers now include NPS as a core part of their benefits package, valuing its tax advantages, low-cost structure and minimal administrative overheads compared to other pension products. To boost adoption, some companies offer matching contributions, encouraging employees to begin their retirement planning journey, spurring strong subscriber growth. Today, nearly a third of all NPS accounts fall under the corporate segment, reflecting a growing emphasis on workplace-based retirement planning. Over the past three years, the number of corporates offering NPS has doubled to nearly 20,000.
Retail participation has also increased, driven by rising awareness of retirement planning, especially among younger individuals, and easier access via digital platforms.
Also read | How Corporate NPS works and tax benefits it offers; know the exit rule
Government initiatives, such as tax benefits under Sections 80C/ 80CCD(2) for corporate employees (under both new and old tax regimes), along with rising financial literacy, have bolstered NPS adoption. While the uptake has been stronger among financially aware individuals, sustained growth will depend on enhancing awareness, simplifying the user experience, and broadening outreach, particularly among citizens in tier 2/3 cities and towns.
In 2024-25, the corporate and retail segments of the NPS industry added approximately 11 lakh new accounts, including those under the newly launched NPS Vatsalya scheme. Over the past three years, annual growth has averaged between 10-12 lakh new accounts. However, the absence of tax deductions for individuals under the new tax regime has led to a slowdown in adoption among the non-salaried segment. That said, the continued availability of tax benefits under Section 80CCD(2), which allows contributions of up to 14% of basic salary, makes NPS a highly attractive retirement planning tool for corporate employees.
Also read | Income tax benefits of NPS under both old and new tax regime for government and private sector employees
How does the Union Pension Scheme (UPS) compare to the NPS in terms of benefits and flexibility, especially for the government employees?
The UPS, introduced for central government employees, provides a defined benefit— 50% of the last drawn salary, plus dearness relief—offering financial certainty after retirement. In contrast, the NPS follows a defined contribution model, where pension benefits depend on the accumulated corpus. While UPS offers predictability and suits individuals who prioritise a guaranteed post-retirement income, NPS provides greater flexibility and control over investment choices. NPS also allows employees to continue voluntary contributions even after leaving government service by transitioning to the all-citizens model, enhancing portability. Additionally, NPS offers a range of annuity options, with or without return of purchase price, giving employees more choice in structuring their retirement income.
Ultimately, the decision between UPS and NPS depends on individual financial goals, job mobility and risk appetite. Those seeking income stability may favour UPS, while individuals prioritising investment flexibility, long-term wealth creation, and portability may find NPS better suited to their needs.
What aspects of NPS do individuals find difficult to understand, and how is HDFC Pension addressing these concerns?
NPS can often seem complex, especially with jargon like ‘active choice’ and ‘auto choice’, which may not be intuitive for many investors. Even among corporate employees, the tax benefit under Section 80CCD(2), which enables savings at the marginal tax rate, is not really widely understood.
While onboarding is fully digital and PRAN can be generated in under five minutes for CKYC-compliant users with Aadhaar-linked mobile numbers, greater awareness is needed to highlight this ease of access.
At HDFC Pension, we have focused on making NPS more accessible and relatable. For instance, we now describe the ‘auto choice’ option as a ‘set it and forget it’ strategy, helping users understand they don’t need to actively manage their investments. We have also developed a user-friendly platform—currently in beta—that offers recommendations based on age and risk profile to guide investors more effectively.
To improve engagement, we have launched corporate awareness programmes using videos and simplified content. Our WhatsApp bot allows subscribers to quickly access their transaction statements, with more services being added. We have also introduced a tech platform (NPS Pro) to support corporate nodal officers in managing employee contributions more efficiently, and early feedback has been encouraging.
How is the younger generation responding to NPS, and what strategies are helping drive interest among them?
Interest from the younger population in NPS is growing, albeit at a slower rate than we would like. Many young individuals in their 20s and 30s may not be particularly motivated to save for retirement, but we have seen that when we present NPS as a flexible, low-cost vehicle, with proven performance that can help youngsters build a meaningful financial corpus over 10-15 years, or even to retire early, there’s more engagement. We also highlight how starting early, albeit with a token amount, can create a dramatic impact on the final corpus because of the sheer power of compounding.
Such initiatives have contributed to more young professionals, especially those working in the service sectors, showing heightened interest in NPS. These sectors tend to have more financially literate employees who are aware of the importance of starting retirement planning at an early age. The challenge, however, is not just in communicating the benefits but also in making NPS seem relevant to younger individuals who might prioritise immediate financial goals over long-term retirement planning.
With increasing financial literacy and a growing recognition of the need to plan for the future, NPS adoption among younger people is likely to rise over time. As awareness about financial planning grows, younger individuals are beginning to realise that NPS is a powerful vehicle to build a retirement corpus.
With the government becoming more active in taxation, is there a risk that NPS might lose its tax-exempt status in the future?
There is always speculation about changes in tax policies. In fact, in the last Budget, the deduction under Section 80 CCD 1(b) was extended to contributions made by parents towards NPS Vatsalya. The government has made a concerted effort to encourage long-term retirement savings through NPS by maintaining the EEE (exempt-exempt-exempt) status. This means that contributions (for corporate NPS contributions and voluntary contributions for those under the old tax regime), accumulation (increase in value through NAV growth), and withdrawals (at the time of superannuation or exit) from NPS are all exempt from taxes, providing a strong incentive for individuals to save for retirement.
The government has also taken steps to incentivise retirement planning, such as increasing the contribution under corporate NPS for employees from 10% of the basic salary to 14%, signalling that it is viewed as an important tool for securing financial future. Finally, it is important to understand that there are only around 8 crore taxpayers in India. While tax incentives are important for this category, NPS offers a wide basket of benefits and flexibilities, qualifying it to be the go-to product for building retirement savings across a wider segment of the population.
What are your thoughts on NPS Vatsalya?
Launched in September 2024, NPS Vatsalya is designed to offer a long-term savings option for children from birth to 18 years. The objective is to help parents initiate their child’s retirement savings journey early, allowing the corpus to grow substantially by the time the child begins earning and contributing further. The response has been encouraging, with nearly 1 lakh subscribers so far.
One concern among parents is the account’s validity if the child moves abroad. The good news is that NPS Vatsalya remains valid even after international relocation, though tax treatment and other regulations may vary depending on the destination country. With its flexibility in fund utilisation and long-term benefits, NPS Vatsalya is emerging as an attractive tool for parents seeking financial security for their children.
RAPID FIRE
Q. What’s an investment tip you’d give to your younger self?
Start early, even if it is a small amount. Invest in equity to harness the power of compounding.
Q. What is a recent book you would recommend?
Same as Ever by Morgan Housel.
Q. If you could only invest in one asset for life, which one would it be?
Equity. No other asset class offers such favourable odds to beat inflation over the long term.
Q. If you could alter your career choice or progression, what would it be?
I couldn’t have asked for a better profession or organisation. It gives me a once-in-a-lifetime opportunity to positively influence our customers’ ability to attain financial freedom and retire with pride.
Q. What is your personal asset allocation right now?
85% equity, 15% fixed income.
What has driven the rise in NPS adoption? How has the subscriber base grown across various segments?
Over the years, NPS penetration has grown significantly across sectors. Many employers now include NPS as a core part of their benefits package, valuing its tax advantages, low-cost structure and minimal administrative overheads compared to other pension products. To boost adoption, some companies offer matching contributions, encouraging employees to begin their retirement planning journey, spurring strong subscriber growth. Today, nearly a third of all NPS accounts fall under the corporate segment, reflecting a growing emphasis on workplace-based retirement planning. Over the past three years, the number of corporates offering NPS has doubled to nearly 20,000.
Retail participation has also increased, driven by rising awareness of retirement planning, especially among younger individuals, and easier access via digital platforms.
Also read | How Corporate NPS works and tax benefits it offers; know the exit rule
Government initiatives, such as tax benefits under Sections 80C/ 80CCD(2) for corporate employees (under both new and old tax regimes), along with rising financial literacy, have bolstered NPS adoption. While the uptake has been stronger among financially aware individuals, sustained growth will depend on enhancing awareness, simplifying the user experience, and broadening outreach, particularly among citizens in tier 2/3 cities and towns.
In 2024-25, the corporate and retail segments of the NPS industry added approximately 11 lakh new accounts, including those under the newly launched NPS Vatsalya scheme. Over the past three years, annual growth has averaged between 10-12 lakh new accounts. However, the absence of tax deductions for individuals under the new tax regime has led to a slowdown in adoption among the non-salaried segment. That said, the continued availability of tax benefits under Section 80CCD(2), which allows contributions of up to 14% of basic salary, makes NPS a highly attractive retirement planning tool for corporate employees.
Also read | Income tax benefits of NPS under both old and new tax regime for government and private sector employees
How does the Union Pension Scheme (UPS) compare to the NPS in terms of benefits and flexibility, especially for the government employees?
The UPS, introduced for central government employees, provides a defined benefit— 50% of the last drawn salary, plus dearness relief—offering financial certainty after retirement. In contrast, the NPS follows a defined contribution model, where pension benefits depend on the accumulated corpus. While UPS offers predictability and suits individuals who prioritise a guaranteed post-retirement income, NPS provides greater flexibility and control over investment choices. NPS also allows employees to continue voluntary contributions even after leaving government service by transitioning to the all-citizens model, enhancing portability. Additionally, NPS offers a range of annuity options, with or without return of purchase price, giving employees more choice in structuring their retirement income.
Ultimately, the decision between UPS and NPS depends on individual financial goals, job mobility and risk appetite. Those seeking income stability may favour UPS, while individuals prioritising investment flexibility, long-term wealth creation, and portability may find NPS better suited to their needs.
What aspects of NPS do individuals find difficult to understand, and how is HDFC Pension addressing these concerns?
NPS can often seem complex, especially with jargon like ‘active choice’ and ‘auto choice’, which may not be intuitive for many investors. Even among corporate employees, the tax benefit under Section 80CCD(2), which enables savings at the marginal tax rate, is not really widely understood.
While onboarding is fully digital and PRAN can be generated in under five minutes for CKYC-compliant users with Aadhaar-linked mobile numbers, greater awareness is needed to highlight this ease of access.
At HDFC Pension, we have focused on making NPS more accessible and relatable. For instance, we now describe the ‘auto choice’ option as a ‘set it and forget it’ strategy, helping users understand they don’t need to actively manage their investments. We have also developed a user-friendly platform—currently in beta—that offers recommendations based on age and risk profile to guide investors more effectively.
To improve engagement, we have launched corporate awareness programmes using videos and simplified content. Our WhatsApp bot allows subscribers to quickly access their transaction statements, with more services being added. We have also introduced a tech platform (NPS Pro) to support corporate nodal officers in managing employee contributions more efficiently, and early feedback has been encouraging.
How is the younger generation responding to NPS, and what strategies are helping drive interest among them?
Interest from the younger population in NPS is growing, albeit at a slower rate than we would like. Many young individuals in their 20s and 30s may not be particularly motivated to save for retirement, but we have seen that when we present NPS as a flexible, low-cost vehicle, with proven performance that can help youngsters build a meaningful financial corpus over 10-15 years, or even to retire early, there’s more engagement. We also highlight how starting early, albeit with a token amount, can create a dramatic impact on the final corpus because of the sheer power of compounding.
Such initiatives have contributed to more young professionals, especially those working in the service sectors, showing heightened interest in NPS. These sectors tend to have more financially literate employees who are aware of the importance of starting retirement planning at an early age. The challenge, however, is not just in communicating the benefits but also in making NPS seem relevant to younger individuals who might prioritise immediate financial goals over long-term retirement planning.
With increasing financial literacy and a growing recognition of the need to plan for the future, NPS adoption among younger people is likely to rise over time. As awareness about financial planning grows, younger individuals are beginning to realise that NPS is a powerful vehicle to build a retirement corpus.
With the government becoming more active in taxation, is there a risk that NPS might lose its tax-exempt status in the future?
There is always speculation about changes in tax policies. In fact, in the last Budget, the deduction under Section 80 CCD 1(b) was extended to contributions made by parents towards NPS Vatsalya. The government has made a concerted effort to encourage long-term retirement savings through NPS by maintaining the EEE (exempt-exempt-exempt) status. This means that contributions (for corporate NPS contributions and voluntary contributions for those under the old tax regime), accumulation (increase in value through NAV growth), and withdrawals (at the time of superannuation or exit) from NPS are all exempt from taxes, providing a strong incentive for individuals to save for retirement.
The government has also taken steps to incentivise retirement planning, such as increasing the contribution under corporate NPS for employees from 10% of the basic salary to 14%, signalling that it is viewed as an important tool for securing financial future. Finally, it is important to understand that there are only around 8 crore taxpayers in India. While tax incentives are important for this category, NPS offers a wide basket of benefits and flexibilities, qualifying it to be the go-to product for building retirement savings across a wider segment of the population.
What are your thoughts on NPS Vatsalya?
Launched in September 2024, NPS Vatsalya is designed to offer a long-term savings option for children from birth to 18 years. The objective is to help parents initiate their child’s retirement savings journey early, allowing the corpus to grow substantially by the time the child begins earning and contributing further. The response has been encouraging, with nearly 1 lakh subscribers so far.
One concern among parents is the account’s validity if the child moves abroad. The good news is that NPS Vatsalya remains valid even after international relocation, though tax treatment and other regulations may vary depending on the destination country. With its flexibility in fund utilisation and long-term benefits, NPS Vatsalya is emerging as an attractive tool for parents seeking financial security for their children.
RAPID FIRE
Q. What’s an investment tip you’d give to your younger self?
Start early, even if it is a small amount. Invest in equity to harness the power of compounding.
Q. What is a recent book you would recommend?
Same as Ever by Morgan Housel.
Q. If you could only invest in one asset for life, which one would it be?
Equity. No other asset class offers such favourable odds to beat inflation over the long term.
Q. If you could alter your career choice or progression, what would it be?
I couldn’t have asked for a better profession or organisation. It gives me a once-in-a-lifetime opportunity to positively influence our customers’ ability to attain financial freedom and retire with pride.
Q. What is your personal asset allocation right now?
85% equity, 15% fixed income.
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