The Public sector Union Bank of India has started selling of the New Pension Scheme (NPS) through over 3,000 branches across the country, giving an impetus to the scheme.
The objective of the NPS is to promote old age income security to all sections of the society. Union Bank will act as a point of presence-service provider (POP-SP) of this scheme. The branches will be able to facilitate opening of NPS account, receiving contribution from time to time and switching of investment option.
“Only 4,000 of the 50,000 bank branches in the country are selling NPS, as many banks are reluctant to distribute the product. They account for just eight per cent of the branches,” said Yogesh Agarwal, chairman of Pension Fund Regulatory and Development Authority (PFRDA), which manages pension fund under NPS, on Saturday.
Envisaging that investors in insurance and mutual fund products for securing the post-retirement would eventually shift to NPS, Agarwal added, “The fund has been giving about 30 per cent more return than the existing insurance and mutual fund schemes. NPS is giving return of 12-14 per cent.”
The contributory NPS was launched by the Centre for its employees in January 2004, instead of the government assuring pension for its employees. In May 2009, it was extended to other people in the age bracket of 18-55 years. However, investor has to choose the investment options available, which is a difficult task even for seasoned investors.
“Though both public and private sector banks can participate in the scheme, many banks are not coming forward,” PFRDA chief said. “Due to poor distribution and very low commission, NPS did not make much inroads into nongovernment pension segment,” he added.
NPS has around 20 lakh members, including around 6 lakh corporate accounts, 12 lakh Central government employees and six lakh of state government ones. Still, it has a small corpus small at around Rs 9,000 crore.
About 27 out of 30 states have joined the scheme. “States of West Bengal, Tripura and Kerala have not joined the scheme citing ideological differences,” Agarwal said. As a part of financial inclusion programme, the Centre also launched a rural pension scheme – NPS Swavalamban in September 2010, with a 1,000 annual contribution from the Centre.