In its latest move to promote NPS, Pension Fund Regulatory and Development Authority (PFRDA) has issued a circular in which it has allowed financial advisers to distribute NPS. IFAs need to clear NISM-Series-XVII: Retirement Adviser Certification Examination and apply for the licence with PFRDA to become a retirement adviser (RA).
The new guidelines on retirement advisers enable IFAs to charge consulting fees from clients in addition to a regular fee. Currently, IFAs are allowed to charge an on boarding 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.
To understand if advisers are willing to distribute NPS, we spoke to a few IFAs.
Hemant Rustagi of WiseInvest Advisers believes that mutual fund retirement schemes have an edge over NPS. “Though NPS has an attractive taxation structure, I prefer MF retirement schemes over it since it has been delivering better returns. Also NPS subscribers have to mandatorily annuitize at least 40% of accrued corpus which is not the case with mutual funds.”
Chennai based adviser AK Narayan of AK Narayan Associates is not planning to distribute NPS to his clients. “I do not recommend NPS to any of my clients since I think Mutual Fund Linked Retirement Products (MFLRPs) can offer better returns in the long term. Such schemes have a better fund management strategy and are tax free at the time of withdrawal.”
Kanak Jain from Kolkata too is not planning to sell NPS. “We have not added NPS to our product basket as I believe mutual fund retirement scheme is a better option for clients as it offers better liquidity as compared to other NPS. However, if our clients show their willingness to invest in NPS, we guide them wherever we can.”
SEBI RIA Amit Kukreja believes NPS is meant for employees who want to invest under statutory retirement benefit schemes like EPF. “I believe NPS is a good option for employees who have to invest mandatorily in EPF. But I don’t distribute NPS as I feel mutual funds can create desired wealth for an individual,” says Amit.
However, a few advisers have a different take on NPS. Hiten Shah, a Pune based IFA who has been distributing NPS for years under sub-broking model is looking forward to acquiring retirement adviser license. “I have been recommending NPS to most of my clients as it has several tax benefits. With the new regulation, I am preparing for the NISM test to sell NPS directly to my clients.”
To sum up, though advisers consider NPS as an attractive and low cost investment, they prefer mutual fund retirement schemes for retirement.
