The pension regulator will lower record-keeping charges for NPS

The pension regulator will lower record-keeping charges for NPS

The pension regulator will soon lower record-keeping charges for the New Pension System (NPS) which accounts for nearly three-fourths of the yearly cost incurred by a customer. Lowering the charges, expected by this year-end, will make this retirement income scheme more attractive, particularly for small savers. The Pension Fund Regulatory & Development Authority (PFRDA) will achieve this by two ways: appointing more record-keeping agencies so that competition will reduce costs and mobilising more customers that will achieve economy of scale, PFRDA chairman D Swarup told ET. NPS, which is compulsory for those who joined central government service on or after January 1, 2004, was opened up to all citizens in May this year. Since then, over 1,100 have signed up for the scheme. PFRDA was set up using the government’s executive powers and now functions more or less like an arm of the government rather than as a full-fledged statutory regulator. That is because the PFRDA Bill, giving the regulator the necessary discretion, is yet to be passed by Parliament. The bill, which is likely to be tabled in Parliament in the winter session, empowers the regulator to appoint more than one record-keeping agency. The current agency, National Securities Depository Ltd, that charges Rs 350 a year for maintaining the records of a customer, was chosen because the government has a say in it by way of nominated directors and holdings through public financial institutions. The regulator will bring in more record keepers after it gets full statutory powers. Secondly, the NPS is approaching the threshold for lowering the charges based on customer subscription that is built into the pension fund regulator’s contract with NSDL. With just two state governments joining the system, the total number of beneficiaries have crossed six lakh, which also includes some central government employees and other citizens. “Twenty-one states have already agreed to join the scheme and have notified. With their contribution coming in, higher volume discounts will further lower the cost of record-keeping,” said Mr Swarup.

The regulator has also asked the government to foot the record-keeping charges of ordinary citizens signing up for the scheme, which will make it more attractive for them. The government already pays the same for central government employees who are members of NPS. Also, the government pays 1.16% of the salary of a member of the Employee Provident Fund Organisation’s pension scheme.

source-Economic Times