PFRDA blames low-cost model for NPS lukewarm response

Blaming the "government mentality" of keeping costs low for the lukewarm response of New Pension System (NPS), interim regulator PFRDA Monday said there is need to give incentives to fund managers for popularising the scheme.

    
"...typically, the government mentality is to have lowest cost...It is so low cost that nothing is happening, nobody is selling, nobody is buying...why should we mandate a management fee on the pension fund managers," PFRDA chairman Yogesh Agarwal said on the sidelines of a CII event.
    
He further said the regulator would explore the feasibility whether there is a need to free the management fee of fund managers and cap it at certain levels after taking views of the Bajpai-headed committee.
    
"...whether there is a need to free it and put a cap...we wait for the committee report to come and if they agree with our view then we would probably go ahead," he added.
    
Agarwal said that the current management fee of 0.009 percent given to fund managers does not cover even the operational cost.
    
"...Unless you make it economically viable for a person to go out and sell its product, it does not work...it is a loss making venture for the people," it added.
    
Last month, Pension Fund Regulatory and Development Authority (PFRDA) set up a committee headed by former SEBI chairman G N Bajpai to overhaul the structure of pension scheme thrown open to all citizens as it failed to pick up.
    
The commitee is expected to submit the report in next one to two months.
    
Initially, the government launched the New Pension System for central government employees joining service from January 1, 2004, but it was extended to all citizens from May 1, 2009.
  
However, the citizen pension scheme received a lukewarm response and only around 11,000 subscribers joined the scheme in 16 months.

PTI