To revive the New Pension System (NPS), a committee has suggested sweeping changes in its architecture. It has proposed bringing in the postal department, telecom companies, pension fund managers, fast moving consumer goods (FMCG) companies and third-party corporate agents for selling the product. The report was given on Tuesday to the Union finance minister.
However, the committee, headed by G N Bajpai, former chairman of the Securities and Exchange Board of India, is against raising absolute incentives for distributors, as it would hurt the small-ticket subscriber. Many players and analysts believe the low incentives are a major hindrance in NPS growth.
It has, instead, recommended replacing Tuesday’s fixed commission with an ad valorem one at 0.5 per cent of the NPS subscription, subject to a minimum of Rs 20 and a ceiling of Rs 50,000. NPS currently charges a flat Rs 436 per year, plus 0.0084 per cent per annum. Other similar schemes are available on an ad valorem basis in the range of 2.3-2.8 per cent of the amount invested during a year.
It has said the Pension Fund Regulatory and Development Authority (PFRDA) should consider bringing down the minimum annual subscription of Rs 6,000 for the NPS to Rs 1,000 per year to expand its reach and coverage. It suggests PFRDA look at revising the annual maintenance charge of Rs 280 and commission fresh research into calculating the costs of NPS delivery.
The committee said the existing NPS architecture did not have a ‘push factor’ and the absolute value of incentives was flawed. It said there was a need to broadbase the network of points-of presence or PoPs, which act as contact centres for potential subscribers across the country.
Contrary to PFRDA’s existing stand on not roping in agents to push NPS, the panel said there should not be an upper limit or qualitative restriction on any category of distributor. “Popularising NPS is a national priority and, as long as the basic criterion of ‘fit and proper’ is met, PFRDA can look at appointing all categories of distribution agents to distribute NPS,” it said.
The panel said with an extensive distribution network already in place, telecom companies are well placed to reach out to the target audience. For, they have many advantages, including popularising the scheme through SMS alerts and fulfilling Know-Your-Customer requirements before enrolling a new subscriber. It suggested pension fund managers be allowed to sell NPS, but not directly.
“In addition, it is possible to also appoint some of the well-known FMCG companies, as well as some third-party corporate agents, which have extensive reach into rural India, to add NPS to their existing pipeline of products delivered into the hinterland,” the panel recommended.
The committee also said PFRDA should be given financial autonomy to help it discharge its duties as an independent regulator and to nurture a pension sector free from controversy or regulatory capture. At present, PFRDA is an interim regulator and functions under the finance ministry.