PFRDA Chairman Hemant G Contractor said that the pension fund regulator may increase the commissions in NPS to make it more attractive for distributors. He was speaking at the 18th Insurance Summit recently held in Mumbai.
Contractor said, “PFRDA is considering revising the incentive structure for NPS distributors. The idea is to modify the incentive structure to make it attractive for distributors without burdening the subscribers.”
Meanwhile, on management fee of pension fund managers, he said that it depends on the bidding process; however, the pension fund regulator will try to keep it viable for the fund managers. Currently, there are seven pension fund managers – HDFC, ICICI, Kotak Mahindra, LIC, Reliance, SBI and UTI who charge 0.01% as management fee.
NPS is largely 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.
Recently, PFRDA has allowed IFAs to distribute NPS. IFAs have to pass NISM-Series-XVII: Retirement Adviser Certification Examination to become a retirement adviser (RA).
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.
