Get ready to pay 3-fold for pension scheme | business | Hindustan Times
Today in New Delhi, India
Jan 25, 2017-Wednesday
New Delhi
  • Humidity
  • Wind

Get ready to pay 3-fold for pension scheme

business Updated: Sep 04, 2012 23:18 IST
HT Correspondent
HT Correspondent
Hindustan Times
Highlight Story

If you are planning to invest in the national pension system (NPS) for your old-age security, be prepared to pay almost triple the cost - Rs. 250 on an investment of Rs. 10 lakh, compared to Rs. 90 today.

Reason: the NPS scheme that was introduced to primarily help poor and unorganised workers to save for their old-age security and was arguably the lowest-cost financial product in the world, has become unviable for pension fund managers (PFMs) and distributors.

In 2008, firms bid low to get to manage the pension corpuses of civil servants and unorganised labour.

They bid at a low fees of 0.0009% of total assets, now raised to 0.25%.

That's still cheaper than insurance products or mutual funds, but goes against the spirit of NPS. Pensions regulator Yogesh Agarwal refused to comment.

"At present, there is no incentive to the fund managers and therefore distribution remains weak and not many people are aware of NPS, the contours have become clear now," a senior official at a private PFM, who did not wish to be identified, said.

Despite three million subscribers, PFMs are not making money.

In the initial model, PFMs were only supposed to manage the money, not market the sch-eme. As a result, costs were low.

"The only way for NPS is to drive demand and create a mass market via financial literacy," said Gautam Bhardwaj, MD, Invest India Micro Pension Services.