The regulator has constituted an internal expert committee to draft the framework for a proposed Minimum Assured Return Scheme (MARS). Once finalised, the draft framework will be released for public consultation before any regulatory rollout, PFRDA Chairman S. Raman said.

Currently, NPS is a fully market-linked retirement product, with subscriber returns dependent on exposure to equities, corporate bonds and government securities. While the system has delivered competitive long-term returns, its market-linked nature has limited adoption among individuals who prioritise capital protection and predictable income.

“MARS is being designed to balance sustainability for pension funds with the need to provide a minimum level of assured returns to subscribers,” Raman said, underlining that the guarantee must be financially viable over the long term.

Who it is for and how it may work

The proposed scheme is targeted primarily at risk-averse investors, including older subscribers and first-time retirement savers uncomfortable with market volatility. Under MARS, pension fund managers would be required to ensure a predefined minimum return over a specified period.

However, experts caution that such guarantees are unlikely to come without trade-offs. To honour assured returns, fund managers may need to maintain additional capital buffers or adopt more conservative investment strategies. This could result in either marginally lower overall returns compared with market-linked options or higher management fees.

Background and policy work

PFRDA has been examining the feasibility of a guaranteed return product for several years. The authority had earlier commissioned external consultants to assess global models and the regulatory implications of introducing guarantees within a pension framework. Findings from these studies will form the basis of the committee’s recommendations.

Officials familiar with the process said the regulator is keen to avoid structural risks that could emerge from mispricing guarantees or excessive risk transfer to fund managers.

Why it matters

The initiative comes at a time when market volatility and rising awareness of retirement planning have sharpened demand for stable, long-term savings instruments. By offering a guaranteed option, PFRDA hopes to broaden NPS participation, particularly among conservative households that currently rely on traditional fixed-income products.

Alongside MARS, the regulator is also working to simplify NPS onboarding and enhance features of the Systematic Withdrawal Plan (SWP), signalling a broader push to strengthen the system’s attractiveness and flexibility.

If implemented carefully, the guaranteed return option could mark a significant shift in India’s pension landscape—one that blends market participation with downside protection.