PFRDA issues draft norms for NPS retirement advisors

Pension fund regulator the Pension Fund Regulatory and Development Authority (PFRDA) is framing rules for “retirement advisors” who are expected to play a major role in propagating the National Pension System (NPS).

“Retirement advisor can play a significant role in helping the prospects/subscribers in deciding retirement plans. Accordingly, it is proposed to issue Regulation for Retirement Advisors,” PFRDA said while issuing the draft rules.

The objective of the regulation is to provide a framework for their eligibility, registration process, fees and to define the scope of work and responsibility, the authority, which has sought public comments on the draft by February 7, said.

NPS has more than 113 million subscribers with total assets under management of more than Rs 1.08 lakh crore.

According to the draft, an individual, firm or corporate body acting as a retirement advisor on NPS would have to obtain a certificate of registration from the Authority.

The individual, proprietors, partners and representatives of a retirement advisor should at least be graduates, the draft says.

Advisors which are corporate bodies or partnership firms would have to provide security deposit or performance guarantee of Rs 1 lakh to the Authority and the amount has been proposed at Rs 10,000 in case of individuals.

Educating and making people aware of the benefits of the retirement planning and creating awareness about the pension schemes is critical for increasing participation in the voluntary segment of the NPS.

“Retirement advisors, with adequate knowledge of a prospects' needs and means, and knowledge of the pension products, will be in a better position to advise individuals, who have different levels of education, financial literacy, wealth, income potential, capacity to save and financial goals,” the regulator said.

An individual retirement advisor offering advice to an individual prospect and facilitating on-boarding to NPS may charge fees from the prospect, the draft said.

In case of individual advisor, the upper ceiling for advisory and on-boarding for a prospect would be Rs 120 and for subsequent services, the charge has been proposed at Rs 20 per transaction or Rs 100 annually.

On the other hand, a retirement advisor which is a body corporate, firm may “charge fees, subject to any ceiling as may be specified by PFRDA, if any”.

The draft further said a retirement advisor should not receive any consideration by way of remuneration or compensation or in any other form from any person other than the prospect/subscriber being advised.