In order to increase the subscriber base in the unorganised sector (i.e. private sector), for the struggling New Pension Scheme (NPS), Mr. Yogesh Agarwal - Chairman of PFRDA (Pension Fund Regulatory and Development Authority) is now making smart moves.
One of the strategy adopted by the regulator, is to use technology to offer the pension plan online. And hence as a step in that direction, earlier this week PFRDA tied up with ICICIdirect.com to offer investors the option of investing online. Hence, now one can start an SIP (Systematic Investment Plan) (by signing in an ECS mandate form with ICICIdirect.com) for as low as Rs 500 a month and also track the net asset values online. But in order to avail the same, ICICIdirect will charge 40 for opening an account and Rs 20 for every subsequent transaction.
Also as a strategy for the off-line model (of business) to promote NPS, PFRDA has decided to put distributors (who run "points-of-presence"), on notice for non-performance and de-register them if they fail to take measures to improve sales. The 40 points-of-sale which consists mostly of banks, receive Rs. 40 for every new pension account they open. According to Mr. Agarwal, 90% of them have failed to perform. "If they fail to perform, we will ask them to make way for ones that are willing to," he said.
He also added further saying - "The total corpus of NPS is Rs. 7,000 crore, whereas collections from the unorganised sector under the scheme is only Rs 40 crore. The Bajpai Committee report is expected by January 2011, which will help in studying as to why the contributions from the unorganised sector are low."
While we think that the steps taken by PFRDA will help in increasing sales. But in our opinion the main reason why NPS has failed to appeal the unorganised specially, is due to lack of withdrawal facility upto the age 60 years (in Tier I account). Also when you withdraw the money after attaining 60 years of age, it is taxable.