Join NPS, get Rs 1,000

Move to lower costs for investors.

The government today announced an incentive of Rs 1,000 per year for those who join a new initiative under the New Pension Scheme (NPS) in 2010-11.

“A new initiative, ‘Swavalamban’, will be implemented for those who join the NPS with a minimum contribution of Rs 1,000 and a maximum contribution of Rs 12,000 per annum during financial year 2010-11, wherein the government will contribute Rs 1,000 per year to each NPS account opened in 2010-11,” Finance Minister Pranab Mukherjee said while presenting the Union Budget.

The finance minster has made an allocation of Rs 100 crore for this. The move will reduce costs for investors. At present, the account opening charge is Rs 50, the annual maintenance fee is Rs 350, the transaction charge is Rs 10 per transaction while the fund management fee is 0.0009 per cent of the fund value every year.

In May 2009, the Pension Fund & Regulatory Development Authority had opened the scheme for all citizens. While the pension regulator is facing challenges in expanding the distribution network to cover the entire unorganised sector, the economic survey released yesterday emphasised the need to educate citizens to take investment decisions based on their risk and return profiles.

“It is an encouraging move as the cost of joining will come down,” said H Sadak, CEO, LIC Pension Fund.

The regulator is likely to bring the fee for managing the pension corpus of companies on a par with what is being charged by fund managers handling government pension schemes.