Pension Fund Regulatory and Development Authority (PFRDA) has issued a circular in which it has asked financial advisers to pass NISM-Series-XVII: Retirement Adviser Certification Examination to become a retirement adviser (RA).
In the circular, PFRDA has said, “With effect from the date of issuance of this circular and subject to the specific exemptions granted under the aforesaid regulations, any individuals, proprietors, partners, trustees, members and representatives of the entity, acting or desirous of acting as retirement adviser under the PFRDA Retirement Regulations, 2016 shall obtain certification from the National Institute of Securities Markets (NISM) by passing the ‘NISM-Series-XVII: Retirement Adviser Certification Examination’ to become eligible for grant of certificate of registration as a retirement adviser, besides fulfilling other terms and conditions mentioned in the regulations.”
To distribute NPS, IFAs need to obtain a passing certification from NISM and apply for the retirement adviser license with the PFRDA.
Here are more details on criteria, fee structure, remuneration structure and compliance requirement for retirement advisers (RA).
Eligibility: Any graduate individual or corporate body can become an RA. 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. 10,000. Corporates should commit a business of Rs.1 lakh within first six months of becoming RA.
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.
Compliance: Retirement advisers have to appoint a Compliance Officer who will be responsible for monitoring compliance of rules and regulations, notifications, guidelines and the administrative work.
Remuneration: RAs are allowed to charge an onboarding fee of up to Rs. 120 per subscriber registration. They can also charge a fee on other services like Rs. 20 for each transaction or Rs. 100 annually. These charges have to be recovered directly from investors.
Additionally, RAs can charge consulting fees from clients which should be fair and reasonable.
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 transaction 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.
PFRDA has exempted advocates and CAs from registering with PFRDA as RAs as such activities are incidental to their practice.
