Advisor to PFRDA admits regulator needs to rework NPS structure
Sanket Dhanorkar 08 October 2010

Mercer, the leading global consulting firm, which had advised the pension regulator on its pension offering, feels that PFRDA has missed out on the big picture in designing the NPS architecture

While the new setup at the pension regulator, Pension Fund Regulatory and Development Authority (PFRDA) is now bending over backwards in an effort to revamp the struggling New Pension System (NPS), it has taken a lot of time for the regulator to see reason in addressing vital imbalances in the struggling pension product. A lot of these efforts have been a result of issues being brought out by various participants and intermediaries in the system. Even a globally recognised consulting firm which advised the PFRDA on this product has admitted that the plan of action has not been executed properly.

Mercer, the leading global provider of consulting, outsourcing and investment services had been roped in by the PFRDA to work out the design of the NPS. This US-based firm has a wealth of experience in dealing with pension systems across different countries in the west and also in the Asia-Pacific region. Hansi Mehrotra, head of wealth management, Asia Pacific at Mercer told Moneylife on the sidelines of a seminar organised by the Australian Trade Commission that the regulator has indeed come out with a half-baked product.

"Although the investment aspect of the NPS structure has been worked out reasonably well by the PFRDA, there exist several glaring issues on the administrative and distribution side," Ms Mehrotra admitted.

Ms Mehrotra pointed out that earlier discussions with PFRDA involved having dedicated advisory personnel attached to the points of presence service providers (PoP-SPs). These advisors would guide prospective investors with the working of the product and enable them to choose a plan suitable to their needs. However, this advisory role was totally scrapped by the PFRDA in its final design structure.

This has only resulted in reduced awareness among the investor community about the benefits of the NPS. Awareness about the scheme has been the Achilles' heel for the NPS with the absence of any marketing efforts around the product. It is only now that the government has woken up from its slumber and given the go-ahead to the PFRDA to create an awareness campaign for the NPS.

"PFRDA made a crucial mistake of thinking that the NPS should be bought, and not sold," clarified Ms Mehrotra. She pointed out that the whole reason behind the slow take-off of the scheme is the lack of incentivisation of the PoPs. "In the absence of any commission, why would anyone want to push this product? Given the choice, any distributor will push products that yield higher commissions." She also said that the PFRDA probably jumped the gun in bringing out the product for the masses and certain decisions were taken too quickly. Asked whether the capital markets regulator, Securities and Exchange Board of India (SEBI) also acted in haste in pushing certain regulations, Ms Mehrotra believes that the regulator did engage in discussions with market participants before taking these decisions. She did, however, point out that such decisions usually take longer in western countries due to the extent of lobbying done by corporates to the government.

saikat sen
1 decade ago
very meaningful and timely as well. The observation of the firm Mercer is very correct regarding the POPs and i myself faced such a situation when the bank personnel tried to sold me one of their FD instead of the NPS
1 decade ago
As it is the scheme is plagued with high NSDL charges, poor governance and poor performance - as far as early subscribers are concerned. If an entry load is also added to the scheme to 'push' the it, I am sure, the scheme will find few takers.
1 decade ago
i want to work as an agent of pfrda. how i can do it and what will be my remunaration for this work.
1 decade ago
This article is pointing that point of service will have advisors who will provide advice to prospective clients-but i will just say that this is all foolish to hear from a ''internationally advisory co -mercer''.i think it is pure wastage of money for getting such useless advice-
I say it is a waste because this model of advisory is already prevaling at AMC offices of MFs-and guys sitting in these offices are not only advicing but also doing labour of filling of form for clients-
If this model has failed in current scenario in MF industry(redemption figures proving its failure)-so how this new model of advisory will help pension schemes to become success-
i am sure all "Regulators" or "super brains" sitting in AC offices are proving themselves as fools who do not want to accept importance of IFAs or simply called a broker or mediator-
Till that time all new ideas will be failure and beurocrats designing tese new norms will keep on eating salaries without any useful output-
Rahul Mudgal
1 decade ago
Hansi Mehrotra has been misquoted here. She did not use such negitive criticism of the PFRDA and simply pointed out areas where NPS could be improved upon, most of which is part of the ongoing public debate on the subject.
Replied to Rahul Mudgal comment 1 decade ago
how do you know?
Keshav B Bhat
1 decade ago
Dear All,
Hope this will open the eyes of the public. It is well known to anyone who as alittlebit of sence how ever the best product may come in to market it has to be marketed and distributed. Now the big way of misseliing any product is saying if you have the distributors they will cheat you and eat all your money so buy direct ant get all the profit for yourself any way after afew years the trend will change but by the time common people will be left without knowing what to do. There will be a time Mr Bhave and the likes will be remembered for their mindless acts as we remember to day Tuglak raj. Great job Mr Bhave you have made you name to be remembered by everyone for generations even after you have gone.
Keshav B Bhat
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