Nobody wants NPS? India’s 'cheapest' retirement plan is failing, advisor explains why
Published by Business Today
Abhishek Kumar's role: Quoted
Abhishek Kumar, in a LinkedIn post cited by the outlet, said falling sign-ups reflect lost tax benefits and minimal distributor commissions, and cautioned that NPS will stay neglected unless PFRDA fixes incentives.
What Abhishek Kumar said
Why are fewer people signing up for NPS?
In my view NPS has become a retirement product that hardly anyone wants to buy: no tax perks, no commissions and no excitement. Sign-ups have been falling. When taxpayers moved to the new tax regime, which does not allow the 80C and 80CCD(1B) deductions, the tax benefit that used to draw people to NPS disappeared, and that removed a huge incentive.
Why do so few distributors recommend NPS?
Look at what the seller earns. Insurance agents and mutual fund distributors are paid far more through commissions on the products they sell, while the payout for selling NPS is pennies. With so little reward on offer, very few people who sell financial products have a reason to recommend it to their customers, however low its cost may be for the investor.
What needs to change for NPS to attract more investors?
Unless PFRDA fixes the incentives, I believe NPS will stay the neglected stepchild of Indian investing. It is a low-cost product built for the long term, but without a tax reason for investors to choose it and without fair pay for the people who distribute it, it will keep struggling to find takers. Fixing those incentives is the job of the regulator.
In our words, from what he said in the piece. General information, not personal advice.
More of Abhishek's views on retirement
The article examines why NPS is attracting few new subscribers despite its low cost. It points to the shift to the new tax regime, which removed related deductions, thin pay for distributors, few retirement advisers and long lock-ins, and notes PFRDA's new pension agent model.
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Nobody wants NPS? India’s 'cheapest' retirement plan is failing, advisor explains why