WHY NPS SHOULD BE OPPOSED IN GOVERNMENT SECTOR

| April 28, 2014

WHY NPS SHOULD BE OPPOSED IN GOVERNMENT SECTOR

What would you say about a scheme that has more than 50 lakh investors, manages assets worth more than Rs 42,205 crore and receives a steady stream of fresh investments every month? The NPS, which was launched 10 years ago for government employees and extended to the general public five years ago, has been a big hit in this way. But a closer look shows why the scheme is far from becoming the popular choice for the common investor.

More than 28 lakh investors in the NPS are central and state government employees who joined service after 1 January 2004 and are, therefore, compulsorily part of the scheme. Their retirement savings account for 93% of the total AUM of the NPS. Another nearly 19 lakh are NPS Lite investors who have joined the scheme primarily because of the Rs 1,000 incentive per year from the government.

Only 2.3 lakh investors have voluntarily joined the NPS since the scheme was opened to the general public from 1 May 2009. At the time of launch, the government was targeting some 200 million investors in the private sector. “The actual figure is not even a sensible decimal of the target,” says Gautam Bharadwaj, co-founder and managing director, Invest India MicroPension Services.

This is surprising because the NPS is a well-designed product. With an annual fund management charge of 0.25% (which will now reduce to 0.1%), the scheme is acknowledged as one of the cheapest financial investment options across the world.


limited-interest

We this week examine the reasons why the NPS has not clicked as a retirement vehicle with the general public. Find out how it scores on eight different parameters.

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Category: NPS, Pensioners

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