NPS throws great opportunity for insurers: PFRDA

MDT/PTI 07 August 2012

According to the NPS provisions, an investor can withdraw 60% of his total corpus, which he has saved during his working life and the rest will go to an annuity plan of a life insurer

Mumbai: Despite the National Pension System (NPS) throwing up a large opportunity to life insurers, there are not enough players in the system to take advantage of this, the Pension Fund Regulatory and Development Authority (PFRDA) said, reports PTI.

"The minimum 40% contribution under the NPS towards annuity is a great opportunity for life insurance players, as they can get captive customers from this system. But we don't have enough players in this arena," PFRDA Chairman Yogesh Agarwal said while addressing a CII summit on insurance.

"While 85% of the total market in annuity plan are with Life Insurance Corp of India (LIC), around 10% are with SBI Life Insurance and the remaining are shared among the rest of the players," he said, adding despite the huge opportunity, life insurers are not entering this segment.

The new NPS provisions make its mandatory contribution of 40% of the total corpus towards annuity schemes of life insurers, which gives a large captive customer base to these companies, the regulator said.

According to the NPS provisions, an investor can withdraw 60% of his total corpus, which he has saved during his working life and the rest will go to an annuity plan of a life insurer.

Talking about the revised NPS guidelines, he said the endeavour is to popularise the scheme among private employees and the general public.

Total corpus of NPS is around Rs18,000 crore, majority of which is contributed by the public sector employees. To make it popular among private investors, the NPS has come up with revised guidelines, he said.

The new NPS guidelines allow the PFRDA to increase the number of fund managers from the present six to an unrestricted number with any financial institution that fits the eligibility criteria to be a fund manager.

It also lets the regulator allow fund managers to increase their commission from the present dismal 0.0009% per Rs 10 lakh to an amount which is yet to be finalised by the regulator.

"Though there will be some rise in charges for fund managers, it will still be very minimal in comparison to what insurers and mutual funds charge," he said.

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M G WARRIER

1 decade ago

Kerala Government has announced introduction of New Pension Scheme (Rechristened as ‘Participatory Pension Scheme’) for its employees joining service from April 1, 2013. CM is lamenting that this will put additional burden on the state exchequer to the extent of 13% of the wage bill in respect of new recruits and savings, if any, will start accruing when they start retiring! For the new recruits, it will be a straight 13% cut on their remuneration package, which, any serving employee will tell, is a little more than what a normal wage revision factors in as rise in total wages. Media has been keeping a learned silence on the issue. NPS was kept outside the purview of VI Pay Commission, although the scheme was under implementation and already there were several central government employees affected by NPS whose wage structure the Commission was reviewing. Some links are missing. Will anyone come out with the real compelling concerns that weighed with GOI and state governments to introduce NPS which in reality is ‘No Pension’ Scheme, even before it has gained legislative legitimacy with appropriate systems for implementation in place?
M G Warrier