Partial Recovery: NPS sees better participation but issues remain:

The New Pension System (NPS) will be two years old on 1 May 2011. From introduction of the Pension Fund Regulatory and Development Authority (PFRDA) Bill to constitution of the Bajpai Committee, several steps have been initiated in the last one year to make the non-starter scheme a success. As a result, the number of accounts covered by the scheme under the unorganised sector has risen from 4,600 last year to 43,522, (as on March 26, 2011). However, the figure is still miniscule if you contrast it with the 17.13 lakh accounts that the scheme covers. Most of these accounts belong to government servants, who have joined after 1 June 2004, as investing in the scheme is compulsory for them. Moreover, the NPS has about Rs 7,538 crore as assets under management, with the chunk (about 80 per cent) coming from Central government employees.

In an earlier interview with Outlook Money, Yogesh Agarwal, chairman of PFRDA, had said: “The number of accountholders is rising. But if you look at NPS Lite, which we launched last September, we already have 0.5 milion subscribers in just about six months of activation. And the finance minister expects 2 million subscribers by the end of March 2012.”

NPS Lite is designed to ensure ultra-low administrative and transactional costs for the economically disadvantaged. To boost the coverage of NPS, the government’s Swavalamban scheme gives an incentive of Rs 1,000 to all NPS Lite accounts. These innovative measures aside, there still are some concerns. For instance, due to lack of participation by service providers, the NPS has not really reached out to the masses. Similarly, electronic clearing system (ECS) is not available at all points of presence. Currently, only a handful, including CAMS and Axis Bank, provide the ECS facility. “There are some fundamental issues which need to be sorted out related to marketing, incentive structure and other things. For that, we are awaiting the Bajpai committee report. Once the report comes and certain changes are done, we expect the sector to take off.”

Many changes are expected for policyholders once the PFRDA Bill becomes a law and recommendations of the Bajpai report get implemented.

Source: Outlook Money, May 4, 2011