Incentive increase to PoPs to boost NPS

Interim regulator PFRDA has decided to enhance incentives to distributors from Rs 50 to Rs 150 for each subscriber for the current financial year, a move aimed at popularising the citizen pension plan, which has received lukewarm response. 

"With a view to boost the Points of Presence (PoPs) efforts to enroll more subscribers in NPS, the PFRDA has decided to enhance, with immediate effect, the monetary incentive for subscriber acquisition from Rs 50 to Rs 150 for the current financial year," Pension Fund Regulatory and Development Authority (PFRDA) said in a statement. 

Currently, there are 35 PoPs, including major banks likeState Bank of India and ICICI Bank , which act like contact and collection points for customers wanting to be part of New Pension System (NPS). 

A low incentive to PoPs has been viewed as one of the reasons for the lukewarm response of the NPS. 

PFRDA further said that the incentive is meant to help PoPs in capacity building for promotion of NPS and redouble their efforts to popularise NPS and bring a large number of subscribers to the NPS. 

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 30,000 subscribers joined the scheme in 17 months. 

In August, PFRDA had set up a committee headed by former SEBI chairman G N Bajpai to overhaul the structure of pension scheme. 

The committee is considering if there is a need to alter the present incentive structure of various stakeholders, and to suggest a viable economic incentive model. 

It is also examining whether it is desirable to have differentiated incentive structures for the government and non-government segments. The committee is likely to submit its report next month.

source: economictimes.indiatimes.com

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Issues With NPS - Interview with PFRDA Chairman

source: dnaindia.com

With 40 financial institutions deployed as points of presence (PoPs) and six fund managers, the New Pension Scheme (NPS) is yet to take off. Pension Fund Regulatory and Development Authority (PFRDA) chairman Yogesh Agarwal spells out to DNA the issues with the NPS and what is expected from the Bajpai committee report. Excerpts:


What are your expectations from the Bajpai committee?
I expect it to show us the way, as there is no stake holder in the whole business today. I think the Bajpai committee will be able to tell us whether pension fund managers should be treated as stake holders or should be given a bigger role. Apart from managing the funds, they should also have a role in marketing the product and make people aware of it. For this, they need to be given incentive and the fee structure needs to be changed. Only then will we see the number of players going up from the six we have now.
How many new fund managers will be appointed?
There is no ideal number. Anybody meeting the criteria laid will be appointed.
Is there any scope of changing the investment pattern for fund managers?
Investment pattern is not a big issue with us at present.
Will revising fee structure help NPS take off or does it also need a new marketing strategy?
There is no marketing strategy, new or old. In fact, the frame of the fee structure is necessary, as they have to be seen as linked. For marketing, you have to raise the fee structure, otherwise who will market at these rates. These two are inter-linked and cannot be seen separately. Fund managers have to be given a bigger role; currently they don’t have a role in marketing. In fact, nobody has a role in marketing. If fund managers are given the marketing role, the cost involved will have to be compensated. As the functions increase, the fee structure has to go up.
Can PoPs be used for marketing?
PoPs cannot be used to market, as they are distribution channel. Its like these are banks primarily and they have much better products to market. Whoever plays the role, will need to be incentivised. Right now, with the kind of fee structure, if they sell an insurance product or a mutual fund product, they get a larger pie. To sell a pension fund they get nothing.
What kind of marketing strategy will the pension fund managers adopt?

NPS Fee may be hiked

Source: sify.com/finance

Increase to be based on recommendations by Bajpai Panel, more players to be included.
There is good news for fund houses managing funds under the New Pension Scheme (NPS). The Pension Fund Regulatory and Development Authority (PFRDA) on Tuesday indicated that the fee structure, both to brokers and distributers, could see an increase once the G N Bajpai panel submits its report by December-end. In addition, there could be an increase in the number of fund houses managing the corpus as well.
Speaking on the sidelines of a Federation of Indian Chambers of Commerce and Industries (FICCI) function on the pension funds management, PFRDA chairman Yogesh Agarwal told reporters, " If the fee structure is opened up further, it will have look at giving room for more fund managers."
The pension regulator had appointed six pension fund managers (PFMs) –  SBI Pension Funds, UTI Retirement Solutions, Reliance Capital Pension Funds, ICICI Prudential Pension Funds, Kotak Mahindra Pension Funds and IDFC Pension Funds Management Company – to manage the NPS corpus. These players were selected after a competitive bidding process.
The existing fund management charges are 0.0009 per cent of the asset under management, which is valid for three years. Even the distributors such as, point-of-presence participants are paid a flat charge of Rs 40 for opening the account and per transaction fee of Rs 20. Consequently, both fund houses and distributors have been unwilling to promote NPS aggressively. "In the present structure, this brings in revenues of Rs 100 in the first year to the POP and Rs 80 in the subsequent years," said Agarwal.
Agarwal also added that there were talks about reasonableness and adequacy of charges. Since PFMs are required to be distinct legal entities, separate from their sponsors, and therefore have to be financially self-sufficient to be long-term players.
Said a CEO of one of the top-five fund houses, "The present structure does not make this a profitable venture for mutual funds because we have to dedicate manpower." He said that the mutual fund industry is managing around Rs 3 lakh crore in short-term liquid funds.

NPS vs ULIP Pension Funds vs Mutual Fund Pension

comparison between the New pension scheme, Insurance Pension Plan (ULIP Based) and Mutual Fund Pension Plan.

NPS the cheaper and Tax Friendly Alternative:

	NPS	Insurance Plans (ULIP Based)	Mutual Fund Pension Plan
Investment amount per year	100000	100000	100000
Charges per Year (Initial Period)	925	13200	1250
Charges per year (5 Years to 10 years)	388	6000	1250
Charges per year (11 years to 15 years)	455	3000	1250
charges per year (16 years)	455	0	1250
Fund Management	0.0009 %	1.25 %	1.25 %
Age limit for annuity	60	Flexible	58
Assume CAGR	10 %	10%	10%
Maturity proceeds after 30 years	1.8 Crores	1.3 Crores	1.39 Crores
Lump sum (Max)	60 %	33%	0-100%
Pension Corpus (Min)	40%	67%	0-100%

 

NPS being the option with the lowest costs eats into the investments the least and hence delivers the highest returns.

 

The draft of the much awaited Direct Tax Code, which is expected to bring about a consolidation of the current tax laws and also effect some changes in the tax laws, has recently been made public.

 

With the drafts of the Direct Tax Code, there seems to be a decided push for making the NPS product more attractive to investors. The major change that the DTC will bring about in the retirement products scenario is that ULIPs will now also be taxed under the EET (Exempt-Exempt-Tax) Regime. This means that unlike in the current scenario, withdrawals from ULIPs will not be tax exempted. It has long been seen in the Indian investments market that the behavior of the retail investors is largely
guided by tax concerns. There is always a rush to invest in order to save on tax. ULIPs had an advantage over the NPS and mutual funds because it was taxed as EEE. This means that the withdrawal and is tax free too. Surely this is a major plus, but with the provisions in the new Direct Tax Code, the NPS will also be taxed in the EEE framework. This will invert the tax situation among retirement products with investment benefits.

NPS will be the only product to be taxed under EEE out of the three (Mutual Funds, ULIPs and NPS).

As a result, its major handicap will now be removed. The government has designed the NPS to benefit the investor to the maximum and the new taxation vis-a-vis the NPS will only add to the attractiveness of NPS.

Conclusion:NPS remains a very good product for its purpose and by aligning the distributors` interests with the PFMs would greatly help the NPS increase its strike rate. Re-iterating that NPS is a post-retirement safety tool,
it is a very effective tool that covers capital protection and also provides growth. With its lowest charges, it also is the cheapest way to get an exposure to the market. For the thousands and lakhs of employees in
the unorganized sector who have negligible or no post-retirement social security benefits, NPS is a boon.

More FAQ on New Pension Scheme

Who shall be responsible for protecting my interests as a NPS subscriber?A) The Pension Fund Regulatory and Development Authority, the regulator, will protect your interest.

What is the process for enrolling in NPS?A) Eligibility: 18-55 years of age. Upon registration, you will receive a permanent retirement account
number. Minimum annual contribution is Rs.6,000. The minimum number of instalments per year is
four. There is no upper limit on the contribution per instalment or on the number of instalments.

Would my personal information be confidential?A) Yes.

Under what circumstances can my account be closed before attaining retirement age?A) The account would be closed under following circumstances: death, account value reduces to zero and
change in citizenship status.

Can I exit before attaining the age of 60 years?A) Yes, provided you annuitise at least 80 percent of your pension corpus.

What if I do not exit the system at or before 70 years?A) In that case, on attaining 70 years, your account would be closed with the benefits transferred to you.

Can someone else make contributions on my behalf?A) Yes.

What would be the penalty in case I am unable to contribute the minimum annual
contribution?
A) You would have to bear a default penalty of Rs.100 per year of default and the account would become
dormant. In order to re-activate the account, pay the minimum contributions, along with penalty due. A
dormant account will be closed when the account value falls to zero.

Are there any investment returns guarantees?A) No. NPS is a defined contribution scheme and the benefits would depend upon the amounts
contributed and the investment growth up to the point of exit from NPS.

Will I be permitted to select more than one pension fund to manage my savings?A) You have to select only one fund. However, the regulator may allow the subscribers to choose more
than one fund in future.

What if I do not select any investment option?A) All your contributions would be channeled into a life-cycle fund.

What are the risks of investing in NPS?A) As with every investment, there is a degree of risk under NPS also. The value of your investment in NPS
may rise or fall.

I am 30 years old and would like to retire at 60. I want a pension of Rs.2,000 per month at
today's prices when I retire. How much do I need to contribute?A) You would need a pension wealth of Rs.319,000 (at today's prices) at the age of 60 to get a pension of
Rs.2,000 per month. To realise this, you would need to contribute approximately Rs.16,600 every year.

What will happen to my savings after I retire at 60?A) You will have to compulsorily invest a minimum of 40 percent of your pension wealth to purchase a life
annuity from an IRDA-regulated life insurer. The remaining pension can be withdrawn in lump sum or in
a phased manner.

What will happen to my savings if I decide to exit NPS before the age of 60?A) You would be required to invest at least 80 percent of your pension wealth to purchase a life annuity
from any IRDA-regulated life insurer. The remaining 20 percent may be withdrawn as a lump sum.

Will the annuity also provide for a family (survivor) pension?A) Yes, you will have an option of selecting an annuity which will pay a survivor pension to your spouse.

On my death, can my nominee continue to operate the account in my name?A) No, the balance standing to the subscriber's account may be transferred to the nominee's account after
following regulator KYC procedure.

Can I opt not to exit in case of disability?A) Yes.

Is the scheme tax free?
Long term savings have three stages: contribution, accumulation and withdrawal. The NPS was devised
when the government was planning to move all long term savings to a tax regime called exempt-exempt-
taxed (EET), standing for exempt at the time of contribution, exempt during the period when the
investment accumulates and taxed at the time of withdrawal. So, NPS comes under the tax regime EET.
However, the government could not muster the political courage to change the taxation regime of EET on
several saving schemes. So, the pension fund regulator has taken up with the finance ministry the need to
remove the asymmetry in tax treatment between the NPS and other schemes such as the PPF. In any case,
the amount spent on buying an annuity would be exempt from tax.

Clarification on Queries

Clarifications  given by PTC Mysore:

1. Is age proof compulsory for opening a NPS account ?

Age proof is compulsory.

2. What is the Procedure to close a NPS account. ?
 Tier I account is an non withdrawal account.  It can be closed only on maturity at the age of 60 years.  For Tier II NPS account holder has to make an withdraw transaction and submit a application UOS - S12 for withdraw.

3. if an nps acnt has been canvassed by the mktg executive, is the presence of the customer at the counter necessary??
 Concerned POP - SP has to decide. 

4. While registering the NPS application form (UOS N2)to PTC Mysore,we ver not entered the bank account details as per the instruction from CO. Now we received email from PTC Mysore saying that they rejected our application because of not filling the bank account details. we ve not recieved the MICR code yet. please suggest a solution

Bank details is mandatory.  If your office is having account with nationalized banks it will be having MICR code.  Please check with your Banker.

5. Do both Anexxure S1 and UOS-S10 required for opening a NPS accont ?



The details of application with nos and its usage has been provided in SOP available in ftp://ptcinfo.org and also in CRA site. Please go through it.

6. Where did the HOs get the email Ids related  NPS.

All the HOs were provided with indiapost.gov.in email IDs for which CRA will send the information

Revised Instructions and Action Points for NPS

Guidelines issued by Directorate regarding the operation of New Pension Scheme Account in Head Post Offices.

Download


1. NPS Action Points Download


2. POP-SP Regn No and CFC Codes - Download

3. List of HOs not submitted the POP_SP Regn Application Form physically to PTC Mysore.

157	KERALA		Alathur Mbr H.O
158	KERALA		Aluva H.O
159	KERALA		Attingal H.O
160	KERALA		Chalakudi H.O
161	KERALA		Ernakulam H.O
162	KERALA		Kannur H.O
163	KERALA		Karunagappaly H.O
164	KERALA		Kottayam H.O
165	KERALA		Kunnamkulam H.O
166	KERALA		Muvattupuzha H.O
167	KERALA		Ottapalam H.O
168	KERALA		Palai H.O
169	KERALA		Perumbavoor H.O
170	KERALA		Taliparamba H.O
171	KERALA		Thrissur H.O
172	KERALA		Tirur(kerala) H.O
173	KERALA		Vaikom H.O
174	KERALA		Wadakanchery-TC H.O

4. List of HOs not configured correctly in MM Point of Sale.

66	KERALA	IRINJALAKUDA	CHALAKUDI
67	KERALA	KOTTAYAM	PALA HO
68	KERALA	KOTTAYAM	VAIKOM HO
69	KERALA	MAVELIKARA	MAVELIKARA HO
70	KERALA	PATHANAMTHITTA	PANDALAM

Guidelines Regarding Operation of NPS accounts in PO

Initial Procedures:
Subscriber should submit the following forms with Appropriate documents.
For Tire I account opening:
1. UOS-S1 (If the subscriber requres one copy of this form, then he may fill another UOS-S1 form Or make a photostat copy of it and it should be attested by the post office and return back to the customer.)
2. The NCIS form should be properly Filled.
3. Customer should bring 2 set of KYC documents (ID proof and AddressProof).
4. While filling the UOS-S1 form page 3 and page 4 can be omitted.
5. Customer has to sign in page 5 of UOS-S1.
6. Post office has to fill the details like registration no, kyc compliance etc in page 5 & 6.

For Tire II Opening:
1. Bank details are mandatory.
2. Customer should submit a cancelled cheque of the Bank.
3. Can not use POSB account for Tier II Activation.
4. If already got the PRAN card, it should be brought for activating tire II account.

Processing of Forms:
1. Post Office should send the Forms on daily basis to Nearest CRA-FC.
2  A.Maximum of 50 forms in a lot.
3. It should be accompanied by a covering letter.
4. Covering letter should be serially numbered and continous.
5. NCIS form and one set of KYC documment should be kept in Post office.
5. Receipt should be printed in duplicate.
6. One receipt should be given to the Customer and the other one should be pasted in NCIS.
7. If the customer requests for one copy of UOS-S1 form,  give a fotostat copy of that form.
8. PRAN form is not Required, UOS-S1 is sufficient.

Download Covering Letter here

Verification of Forms:

Regarding Filling Scheme info in Application Form

From CRA.NSDL Website:
As per the present guidelines of Pension Fund Regulatory and Development Authority(PFRDA),contribution towards pension will be invested in the default Schemes termed Scheme of various Pension Fund Managers in the proportion of 85% in fixed income instruments and 15% in equity and equity related instruments. Hence, in the application form for PRAN,the details of the schemes need not be mentioned.

New Pension Scheme AD-Banner

Designed by Technology Wing, O/o PMG, Northern Region, Calicut

Clarification regarding sending NPS forms to CRA-FC on a daily basis

Processing of NPS Forms:

(i) The Supervisor of the Post Office shall submit all such accepted application forms (including supporting documents) on a daily basis, to designated CRA/CRA-Facilitation Centre (FC) for digitization by hand under receipt/registered post with AD where the Post Office and the CRA-FC are co-located.

(ii) Where the Post Office and CRA-FC are not co-located, the former shall transmit the documents (original application form along with documents) to the nearest CRA-FC or CRA in Mumbai, by registered post.
For this purpose, at the time of POP registering with CRA, the latter shall map Post Offices to nearest CRA-FC location. Record of dispatch of documents will be kept in the post office.”

It has come to the notice of Directorate that some postmasters are retaining the NPS forms in post offices for more than one day and then sending to the CRA-FC only when they have got 50 forms. It is once again clarified that no form should be retained in the post office even for a single extra day; whatever number of forms is collected must be sent to the CRA-FC on the next day without nay delay.

Clarifications Regarding NPS Operatins

Q: A Subscriber has to deposit 4 times in a year for Tier I account. Can he Deposit it in one day?

Ans: No. In a day only one deposit is possible.

Q: Where we can check the status of PRAN Card ?

Ans: All the details are available in nsdl website http://www.npscra.nsdl.co.in/. Pleae visit the site for updates regarding NPS news.

        1. To Check the status of the PRAN Card  Visit Here
        2. To Check Status of Subscriber Registration /Contribution invested through Receipt - Here
        3. Track the status of PRAN application No Here
       
Q: What is the Address of CRA-FC centre at Cochin ?

Karvy Data Management Services LtdG 39,
Panmpally Nagar,
Manorama Jn,
Opp Kerala State Housing Board Kochi Kerala
682036
Tel - 04842316406

Ask Your doubts in the comments Section.

Queries Related to New Pension Scheme

Hi..
Please post  your queries related to New Pension Scheme here.

We will be very happy to answer those Queries.

Regards,

New Pension Scheme Wing
O/o PMG,
Northern Region, Calicut