Let MF agents sell pension products: NPS managers

In a bid to ensure higher volumes, New Pension Scheme (NPS) fund managers have told the Pension Fund Regulatory and Development Authority (PFRDA) that they should be allowed to use their respective distribution networks (mutual fund agents) to sell the pension plan.

In a meeting with the Pension Fund Regulatory and Development Authority (PFRDA), the managers had mooted the idea of training their existing sales agents on the NPS product. They had also proposed a commission of at least two-three per cent to the agents for selling the product.

This follows the pension fund regulator seeking feedback from fund managers on the Bajpai committee report. The report had recommended pension fund houses float a separate distribution company for marketing the products.

“Since we have our own agents selling mutual fund products, they can be easily trained and used to sell NPS as well. There is no need for floating a separate distribution subsidiary for selling only NPS,” said an NPS fund manager, on condition of anonymity.

The Bajpai committee, set up in August 2010 under the chairmanship of former Securities and Exchange Board of India Chairman G N Bajpai, also recommended 0.5 per cent commission on the premium for agents and suggested pension fund managers not market these products directly. Currently, pension fund managers are not allowed to sell NPS. There are over 30 NPS distributors, including government and non-government organisations and some microfinance institutions. A distributor gets Rs 150 for every new account and Rs 20 per transaction, while for the NPS Lite scheme, an agent gets a fixed amount of Rs 92, irrespective of the amount invested.

Since its launch in 2003, NPS sales haven't picked up as expected by fund managers. Industry experts believe the lack of a proper distribution network is the main reason for the dismay performance.

As on August 31, NPS had a total subscriber base of around 2.4 million, with a total corpus of Rs 10,773 crore. The fund is managed by seven fund houses, including LIC Pension Fund, SBI Pension Fund, UTI Retirement Fund, IDFC Pension Fund, ICICI Pension Fund, Kotak Mahindra Pension Fund and Reliance Capital Pension Fund.

If the commission offered by PFRDA for selling NPS was not competitive, it would be difficult to lure agents, said an NPS fund manager. “Even for opening a public provident fund account, an agent gets one per cent commission. So, 0.5 per cent commission (as recommended by the committee) for selling NPS looks unattractive,” he said. He suggested the commission structure should range between two per cent and five per cent.

PFRDA is in talks with the Life Insurance Corporation of India on using its agency for distributing NPS. LIC, the largest life insurer in the country, has an agency force of 1.4 million. However, the details of the plan is still are not clear, since the commission earned by an insurance agent per policy is four-30 per cent, depending on the type of plan sold.

The Insurance Regulatory and Development Authority has to first clear the proposal of allowing insurance agents to sell financial services products other than insurance policies.