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Armed with statutory powers after the pension Bill was passed by Parliament earlier this month, the pension fund regulator plans to overhaul some of the regulations governing the managers of the National Pension System.
“We are re-looking our regulations. We will tweak some provisions in the guidelines governing the pension fund managers. The guidelines will be finalised by December,” said Yogesh Agarwal, Chairman, Pension Fund Regulatory and Development Authority (PFRDA).
The PFRDA Bill, 2011, is now a law as it was passed in both Houses of Parliament last week after being in limbo since 2005.
“On the ground, the Bill doesn’t change anything for the NPS. However, there will be an increase in confidence and enrolments from subscribers as we now have the statutory powers to impose penalties and punishment for violating our guidelines,” Agarwal said.
The Government is also in the process of selecting board members for the regulator, which currently has a staff of 60.
Scope widened
NPS started as a pension scheme for employees of the unorganised sector in 2004. Subsequently, to lower its burden from pension liabilities, the Government moved its employees to NPS from the earlier defined benefit pension programme. In 2009, the NPS was extended to all employees.
Currently, NPS has 55 lakh subscribers with a total corpus of Rs 35,000 crore. The scheme has given returns of 12-14 per cent over the last one year.
According to a pension fund manager, distribution is a major issue as the commissions for marketing and distribution of NPS is very low at 0.25 per cent, especially for retail distribution.
According to Puneet Nanda, Executive Director, ICICI Prudential Life Insurance, “NPS is a very good product for planning the long-term pension needs of customers. With enhanced incentives for marketing and distribution, it can offer a good proposition to them. We have begun witnessing good traction for this product from corporates.”
PFRDA is also planning to allow its subscribers to partially withdraw from the corpus before maturity. Currently, subscribers to NPS can exit at the age of 60.
“At present, we do not allow any withdrawal. But there are requests to look at withdrawals in cases, such as emergency medical condition, and we are looking at that,” Agarwal said.
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