New Pension System (NPS): What Lies Ahead

It is now three years since the New Pension System (NPS) was made available for the general public (May 2009). For government employees who started working after January 1, 2004, their mandatory pension contributions are being managed by default by this system. However, managing government's pension liabilities was just one of the objectives of setting up NPS.Sure, thanks to the previous defined benefit system where a retired person gets pensions based on a pre-determined formula, the pension liabilities of central and state governments were spinning out of control. NPS, which is based on defined contributions where the pensions you get depends on the final outcome of the investment performance of pension fund managers and your choice of investment options, would have helped stem the rot quite a bit. Things are quite precarious when it comes to pension liabilities in case of some states. But the biggest reason for having NPS was to cover 89 per cent or so of the workforce not covered by any form of pensions. There the progress has been dismal. I wonder  if NPS has even crossed 10,000 subscribers from the general public. Why? The pensions regulator PFRDA thinks that incentives to distributors holds the key. For NPS, the absence of distributor incentives and a very small fund management charge by fund managers makes major stakeholders far less excited about it. No wonder, there is very little awareness about the scheme in the first place. Only recently there have been some TV ads. All this is a pity for NPS is a great product, something acknowledged by all experts. It provides great options. It is portable i.e. you can move from one job to other or cities and you won't have to open another account. Besides it doesn't allow easy withdrawals, a bane of all Indian pension schemes. But I don't think the two problems I just mentioned are the only ones bothering NPS and Indian pensions reforms in general. The key to giving fillip to pension reforms and NPS is to get the PFRDA Bill passed something that is being opposed by UPA allies like TMC and former allies, the Left. Like all sectors, you need a regulator or an umpire to get the development and regulations rules in place. People will only start taking things seriously then. PFRDA then can also make efforts to make NPS better known. The PFRDA Bill  passage through the Parliament seems postponed yet again. In the next 12-13 years, India will possibly add about 100 million people in the ranks of the retired. That's the population of many European countries put together. Don't tell me that it isn't important enough to be attended to.