No takers for National Pension Scheme! Here is why

The Parliament may have passed the Pension Fund Regulatory & Development Authority Bill (PFRDA) in September, but the National Pension Scheme (NPS) is still far from popular. While the government wants fund managers to increase their involvement, players want more tax benefits.

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It has been around for a decade, but the NPS, which even got a boost from the government in 2009 when it was opened up to private players, is not seeing much traction.
The Scheme has accumulated a total corpus of just Rs 37,000 crore from 50 lakh subscribers. And the Finance Ministry is not amused by this underperformance. It blames this on a sense of complacency among fund managers.
Rajiv Takru, secretary, Department Of Financial Services says, “There is a sense of complacency on the part of fund managers. They know the PFRDA has an x amt of money which is coming from a captive audience and this x amt is to be distributed amongst 8 fund managers all of whom are allowed to charge 0.25 percent and they think it is a nice source of income. That's not good.”
The anticipated boost from the passing of the PFRDA Bill has not really worked out either. And Takru says enforced membership for private players may be the key.
Sandeep Shrikhande, chief executive officer, Kotak Mahindra Pension Fund says, “The money that is invested on behalf of the Government employees can be invested only with the public sector fund managers. So right now, the public sector does not have access to the government funds, so it is very challenging.”
But experts say the challenges go beyond availability of funds and incentives that make NPS more attractive are the need of the hour.
Abizer Diwanji, partner & national leader- Financial Services, EY says, “If you have a government tax-free, 8 percent guaranteed return PPF, why would an investor look at NPS? So government should be working that out. Secondly, the tax rebate comes in on our income which you get at hand, hence you spend it. Where is the saving? The UK system, your tax rebates gets automatically deposited to the pension spot. That's how it will work.”
Experts add that the government has to work quickly on such measures since the FDI allowed under the PFRDA Act will really start kicking only after five years.