Pension Fund Regulatory and Development Authority (PFRDA) is planning to allow IFAs and corporates to distribute NPS. In this context, it will soon introduce Retirement Adviser (RA) regulations to govern them. Hemant G Contractor, Chairman, PFRDA has confirmed this development to Cafemutual on the sidelines of CII Insurance Summit recently held in Mumbai.
Contractor said, “We are planning to introduce a concept called retirement advisers in India in which we will allow IFAs and firms to sell NPS. It’s in a very nascent stage.”
PFRDA has prepared a concept note which is open for public comments till August 21. “Pension Fund Regulatory and Development Authority is in the process of drafting regulations for Retirement Advisers. Towards this end, the Authority has prepared a Concept Note which is being placed on the website of PFRDA for stakeholders and public comments,” said PFRDA.
The concept paper has outlined the following proposals:
Eligibility: Any graduate individual or corporate body can become an RA. However, such individuals and corporates will have to obtain a certification on retirement planning from an institute accredited by PFRDA. However, SEBI registered RIAs and CFP certificate holders are eligible to become RAs without this certification.
Performance guarantee: To become a retirement adviser, an individual will have to make a commitment of giving a minimum business of Rs.50,000 and a corporate firm is expected to get a business of Rs.5 lakh within first six months.
Fee and structure: IFAs and corporates have to cough up a non-refundable fee of Rs.500 and Rs.5,000 respectively to apply for the license. In addition, IFAs have to pay a registration fee of Rs. 1,000 while corporates have to cough up Rs. 10,000. The license will be valid for three years. Apart from distribution, retirement adviser have to appoint a Compliance Officer who will be responsible for monitoring compliance of rules and regulations, notifications, guidelines etc. and administrative work.
Remuneration: RAs are allowed to charge an upfront fee of up to Rs.120 for subscriber registration. They can also charge a fee on subsequent services like Rs.20 for each transaction or Rs.100 annually. These charges have to be recovered directly from the investor. Also, the RA cannot charge more than these limits.
However, RAs can earn commission as a sub-entity of points of purchase (POPs) for their execution services.
Currently, NPS is distributed through points of purchase (POPs). POP is an entity that sells pension products to subscribers. These entities act as collection points and extend a number of customer services to NPS subscribers, including requests for withdrawal from NPS. Almost all banks (both private and public sector) and majority of stock broking firms are NPS POPs. The commission to such POS is currently capped at 0.25% of the transactions subject to a minimum of Rs.20 and maximum of Rs.25,000. POP can also charge Rs.100 for initial subscriber registration and Rs.20 for incorporating any change in subscribers account.
Earlier, PFRDA had proposed to allow IFAs and corporates to distribute NPS. The proposal said that IFAs would be able to sell NPS by empaneling with any one POP under sub broking model called POP – sub entity (POP-SE).
The concept paper has exempted advocates and CAs from registering with PFRDA as RAs as such activities are incidental to their practice.
Click here to read the concept paper.
