Pension Fund Regulatory and Development Authority of India (PFRDA) has urged distributors of NPS, particularly points of purchase (POPs) to expand the coverage of pension sector across the unorganized sector which occupies 90% of the workforce.
Unorganized sector workforce is neither taxed nor monitored by the government. Self-employed people like street vendors, vegetable vendors and local laundry services come under this category.
In a press release, PFRDA Chairman Hemant G Contractor has said, “India has the highest percentage of informal workforce in the world, which is largely uncovered by any pension scheme. The demographic changes impacting the need to provide for pension includes increasing longevity, nuclear families and the ever increasing proportion of old age people, especially women whose longevity is higher. These factors have brought the issue of pension centre stage in most of the policies of nations worldwide. NPS has the advantage of market commensurate returns, flexible options, transparency and low cost. Effort was required to meet the challenges facing the unorganized sector including low awareness, low income levels and the lack of long term vision to save for the future. Moreover, 10% of the senior citizen population in the world resides in India and this number would increase from current 100 million to 300 million by 2050 and hence the sense of urgency to expand the coverage to meet the challenge of exponentially increasing fiscal pension liability.” He was speaking at a conference on NPS distribution held recently in Delhi.
Contractor further said that PFRDA is planning a nationwide training programme for all government and non-government nodal offices primarily to increase awareness and expand the reach of NPS into the nook and corner of the country.
Currently, NPS is distributed through 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.
Recently, PFRDA has come out with a draft circular on Retirement Adviser (RA) in which it has proposed to allow IFAs and corporates to distribute NPS.
Meanwhile, PFRDA awarded the best performing POPs for their performance in the NPS distribution in FY 2015-16. HDFC Securities received an award for best POP under all citizen model, corporate model and private sector. Similarly, SBI won an award under the category of highest POP branches activation. ICICI Securities won under the category of best POP-branch with highest subscriber registration.
Currently, NPS has more than 1.20 crore subscribers with total AUM of over Rs. 1.20 lakh crore.