Lack of tax incentives and inadequate awareness about the New Pension System (NPS) has largely turned unappealing for the investors. The scheme barely could attract 1,109 subscribers toll 31st July, reports PTI.
Pension Fund Regulatory Development Authority (PFRDA) rolled out NPS for all citizens from 1st May. Till 31st July, barely 1,109 forms were collected by the 22 points of presence (POPs) appointed by the interim pension fund regulator.
"Initially, when NPS for the private sector was launched, we expected it to grow at a slow pace, but it grew at a much lesser pace than expected," ICICI Prudential Pension Fund Management director-on-board, Tarun Chugh, told PTI.
ICICI Prudential Pension Fund Management, which has 49 branches authorised by the PFRDA to act as points of presence, collected 218 forms—the highest among all 22 POPs. He further said the lack of tax-breaks for NPS was one of the major reasons for its failure.
"At the time of retirement, one can withdraw 33% of the contribution and the rest 67% is used for annuity, which is taxed. There should not be any tax at the time of withdrawal," Chugh said.
Taxation on annuity at the time of withdrawal under NPS is not in line with provident fund, he said. During the launch of NPS, interim pension fund regulator chairman D Swarup had said, "NPS for private sector will be slow in the beginning as we do not foresee large volumes initially."
UTI Asset Management Company Chief Marketing Officer Jaydeep Bhattacharaya said, "Pension is a push-based product and lack of adequate provisions to push NPS makes its penetration low."
Awareness about the system is also less. "Eighty 87% of India's workforce does not have a pension plan. There is a need to make them aware about the pension plans," he said.
"As the cost structure of NPS is higher than mutual fund products, NPS needs to find a way to reduce the cost structure," Bhattacharaya added.
UTI AMC has collected 121 forms from the subscribers. Citing no tax benefits on NPS as one of the reasons for a low number of people joining the system, an official from another pension fund manager said, "People should feel the necessity to join NPS which can be generated by giving them adequate tax incentives."
There is a need for NPS to be publicised properly as not many people are aware about the system. Among all other POPs, Kotak Mahindra Bank collected 182 forms, Computer Age Management Services 160 forms and Axis Bank 138 forms. UTI Mutual Fund, Reliance MF, ICICI Prudential Life Insurance, IDFC MF, SBI and Kotak MF are the 6 fund managers selected by the pension regulator PFRDA.