NPS corporate model split: How new charges could shape subscribers' corpus

By creating distinct frameworks for government and private-sector employers, regulator aims to streamline the National Pension System

The pension regulator has reclassified the corporate model of the National Pension System (NPS) into two categories — government entities and legal entities (other than government) — for simplicity in structure and costs.

 

Organisations registered under the NPS corporate sector model will have to decide whether they fall under the government or legal entity frameworks. The changes are effective from January 1, along with a revised charge structure for points of presence (PoPs), said the Pension Fund Regulatory and Development Authority (PFRDA).

 

What the reclassification means

 

“The PFRDA has effectively split the old corporate NPS bucket into two clearer buckets: Government entities and legal entities (other than government),” said Anooj Mehta, vice-president for partner success, at 1 Finance.

 

 

Government entities include statutory bodies and central or state-owned companies. Such organisations can shift to the government-sector NPS model if they meet certain conditions, including transferring any superannuation fund corpus to NPS within one year and having the capability to directly integrate with the Central Recordkeeping Agency (CRA).

 

“If an organisation is effectively an extended arm of the government, it can move into the government sector model. Otherwise, it will be treated as a legal entity and the applicable charge structure will apply,” Mehta said.

 

PoP charges

For subscribers associated with legal entities, the regulator has prescribed an annual PoP charge of 0.20 per cent of assets under management, which will be adjusted through the net asset value and paid quarterly.

 

Amar Ranu, head of investment products and insights at Anand Rathi Share and Stock Brokers, said the fee will rise as the account balance grows. “If a subscriber has Rs 500,000 in their NPS account, the annual PoP servicing charge will be about Rs 1,000. If the corpus grows to Rs 1000,000, the charge becomes Rs 2,000,” he said.

 

Government entities exempted

Government entities will not be required to route services through PoPs.

 

“Government-controlled organisations will now move to the government NPS framework with direct integration with the CRA, eliminating the need for PoP intermediaries and related charges,” said Vishwajeet Goel, head of Pensionbazaar.

 

Experts say this structure can lower intermediary costs and simplify account administration for employees.

 

For individual subscribers, opening an account through the e-NPS platform could be more cost-efficient in some cases.

 

“Subscribers on boarded through e-NPS and making contributions digitally are not linked to a PoP, so they do not pay PoP charges,” Mehta said. However, accounts opened through a PoP will continue to attract service charges even if later contributions are made online.

 

Experts say the online route may suit digitally comfortable investors, while PoPs may remain useful for those seeking assisted onboarding and guidance.