Fee on low-cost pension plan to be below Rs 100

The account maintenance charges of the proposed low-cost pension scheme would be drastically reduced to provide safety to people in the unorganised sector at affordable prices, interim regulator PFRDA said.

“We are holding discussion with National Securities Depository (NSDL) to bring the cost down. The account maintenance charge would be reduced drastically. It will be below Rs 100 from the current Rs 350,” a Pension Fund Regulatory and Development Authority (PFRDA) official said.

Under the present structure, a subscriber has to pay at least Rs 470 as initial charges in the first year and Rs 350 annually to NSDL for maintenance of account.

The official added that the PFRDA was negotiating on the final price and by September 23, the exact rate would be known. He further said the government might bear the account maintenance charges of the proposed low-cost pension scheme. “The government is likely to bear the charge after PFRDA reaches an agreement with depository NSDL on the low-cost pension model,” he added.

PFRDA has been asking the government to bear the cost of maintaining accounts of policy holders under the New Pension System, after it was thrown open to all citizens from May 1 this year. However, the proposal is still lying with the government and was not even announced in the Budget.

The unorganised sector employs about 86 per cent of the country’s total workforce. Both the low-cost and the present model would run separately. The subscribers will have to make their choices of the scheme which is likely to be operational by the end of this year. “Some facilities in the present model might not be there in the low-cost model. The functionality would be less in the cheaper model,” the official added. Initially, the government launched the NPS for central government employees joining service from January 1, 2004, and later it was extended to all citizens from May 1 this year.

There are six fund managers for all the citizens’ scheme — IDFC Mutual Fund, Kotak Mahindra, SBI, UTI Asset Management, ICICI Prudential Life Insurance and Reliance MF — to manage the corpus of customers.

Besides, there are 21 points of presence (PoPs) of NPS, which include, State Bank of India, ICICI Bank, IDBI Bank, Oriental Bank of Commerce, Axis Bank and Union Bank of India. PoPs are contact and collection points for customers wanting to be part of the NPS.