Sriram<\/a> Iyer, managing director and chief executive, HDFC Pension Fund Management Ltd.<\/p>\n The new tax regime effect<\/p>\n
The NPS appeal is also waning because more taxpayers are shifting to the new tax regime. To be sure, 72% of taxpayers opted for the new tax regime in 2023-24, showed data from the Central Board of Direct Taxes.<\/p>\n
\u201cThe NPS used to sell like hot cakes, but with more people adopting the new tax regime, it\u2019s no longer a popular choice among clients,” said Makesh Sivasankar, founder of SAMISH Investment Services, which has partnered with HDFC Pension as its pension agent.<\/p>\n
Under the old tax regime, individuals can claim deductions of up to \u20b91.5 lakh on NPS contributions under Section 80C, plus an additional \u20b950,000 under Section 80CCD(1B). \u201cMany people would invest \u20b950,000 every year to avail the 80CCD(1B) benefit,” said Sivasankar.<\/p>\n
Although Section 80C and 80CCD(1B) deductions are not available under the new tax regime, employers’ NPS contributions\u2014up to 14% of basic pay\u2014are still tax-deductible for both government and private sector employees. That\u2019s why platforms like PensionBox are focusing more on partnering with corporations than chasing individual retail clients.<\/p>\n
\u201cThe retail side of the NPS will take a hit going forward,” said Kuldeep Parashar, CEO and founder of PensionBox, backed by Rainmatter by Zerodha.<\/p>\n
Enter pension agents<\/p>\n
In 2024, the PFRDA introduced an alternative to the RA licence by allowing individuals to work as pension agents. Unlike RAs, they do not register directly with the regulator but instead operate as agents of NPS Points of Presence (PoPs)\u2014entities authorized to open NPS accounts. This eased the compliance burden, as individuals don’t need to register directly with the PFRDA.<\/p>\n
The model is simple. PoPs have fixed fee structures, and when pension agents bring them business, they share a part of the revenue with the agents.<\/p>\n
A PoP can charge a maximum of \u20b9400 for opening an account and 0.50% commission for new contributions, with a cap of \u20b925,000 per client. They can also charge a small persistence fee\u2014up to \u20b9100\u2014if the NPS subscriber invests a certain amount every year and keeps the account active. There is no commission on the total assets under management (AUM).<\/p>\n
However, Parashar from PensionBox said PoPs and pension agents face the same hurdle\u2014low monetary incentives.<\/p>\n
Besides, since the NPS comes with multiple choices and complex withdrawal and annuity rules, it requires significant sales effort, and the low monetary incentives make it even harder to sell at scale, added Abhishek Kumar, a registered investment adviser (RIA) and founder of SahajMoney.<\/p>\n
\u201cSince it was never actively marketed, it also couldn\u2019t achieve top-of-mind recall as a retirement solution. With reduced recall and no tax benefits, the NPS has shifted from a pull product to a push product\u2014especially for PoPs in physical settings, where retirement-focused investing intent is low. Push-driven distribution raises costs, while remuneration remains minimal,” said Santosh Navlani, chief operating officer of ET Money.<\/p>\n
The smart thing to do<\/p>\n
Harsh Roongta, RIA and founder of Fee Only Investment Advisers LLP, said that given the long-term and illiquid nature of pension products, they usually need either compulsion or tax incentives to gain traction. \u201cFor government employees, the mandatory contributions ensure participation. For the private sector, the tax breaks on corporate deductions help. But beyond these groups, the NPS remains a hard sell for the general public,” he noted.<\/p>\n
He added that even the tax benefits on employer contributions face a practical limit. \u201cThe overall ceiling of \u20b97.5 lakh a year is largely absorbed by Employees\u2019 Provident Fund contributions, leaving little room for additional NPSadvantages.”<\/p>\n
He said the government should consider giving employees an option to choose between the EPF and the NPS to increase adoption among private sector employees.<\/p>\n
Parashar said the distribution commission for PoPs should be charged to the AUM and not the contribution. Users who want lower fees can open accounts with the CRAs, just like direct mutual fund plans.<\/p>\n
\u201cWe can keep the NPS expense ratio lower than mutual funds with the lowest total expense ratio, but we should shift to an AUM model for charging distribution commission. In the US, 401(k) and Roth IRA plans have an AUM model of distribution,” he said.<\/p>\n
\u201cGiven that the NPS is designed to help the customer build a meaningful retirement corpus, the focus is also on keeping costs low and aiding the compounding journey to maximize the terminal value for the client at the time of retirement,” clarified Iyer from HDFC Pension.<\/p>\n","protected":false},"excerpt":{"rendered":"Experts attribute the cooling interest to the growing appeal of the new tax regime, which offers no benefits…\n","protected":false},"author":2,"featured_media":99717,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[45,49,48,133,35403,57824,18926,57826,57828,57827,131,132,57825,18861,32001,7712],"class_list":{"0":"post-99716","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-personal-finance","8":"tag-business","9":"tag-ca","10":"tag-canada","11":"tag-finance","12":"tag-national-pension-system","13":"tag-new-tax-regime","14":"tag-nps","15":"tag-nps-tax-benefits","16":"tag-pension-fund","17":"tag-pension-planning","18":"tag-personal-finance","19":"tag-personalfinance","20":"tag-retirement-advisers","21":"tag-retirement-fund","22":"tag-retirement-plan","23":"tag-retirement-planning"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/99716","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/comments?post=99716"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/99716\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media\/99717"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media?parent=99716"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/categories?post=99716"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/tags?post=99716"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}