The New Pension Scheme (NPS) launched in May 2009 for the informal sector turned out to be a non-starter. To energise NPS, the pension regulator, Pension Fund Regulatory and Development Authority (Pfrda) had set up a committee under former Sebi Chairman, GN Bajpai. The committee that came out with its report last week has proposed a complete change in its incentive and fee structure. If implemented, it would make NPS an even more attractive long-term retirement savings product. The scheme provides various investment options and can help build a good post-retirement corpus in the long term.
Key Recommendations
In its recommendations to take NPS to the masses, the committee has said the minimum subscription required of subscribers should be slashed to Rs 1,000 from Rs 6,000 a year. It has also recommended that the Central Record-keeping Agency (CRA) charges be reduced significantly and fund management charges be revised up. The CRA charges stand at Rs 280 a year. For a customer who invests the minimum Rs 6,000, it turns out to more expensive than most other financial products. “Once the charges come down, NPS would become a very competitive product and will attract much larger number of investors”, says Hemant Beniwal, member, Financial Planners’ Guild-India. The committee has suggested that the NPS be marketed through the postal department, FMCG companies and telecom operators to leverage their vast reach. Don’t be surprised if you see a slew of NPS advertisements on various media in future. Acknowledging that to sell any financial product, the intermediary must have some financial incentive, the committee said there is a need to retain a floor rate of Rs 20 and upper limit of Rs 50,000 on the incentive.
indianexpress.com
