The New Pension System (NPS) will not only bring retirement planning to the unorganised sector but will also completely transform the investment scenario in the country.
This is good news for the workers in the unorganised sector. The fruits of long-term financial planning, which have been available only in the organised sector, will now be available to the unorganised sector, the self-employed as well as all others who don't come under the ambit of any pension system. In a reform long overdue, the Pension Fund Regulatory & Development Authority (PFRDA) has finally put the NPS in motion.
An individual will be able to open an NPS account with a designated 'point of presence' (POP) and start saving for a pension. Moreover, this system is not for private individuals only, the pensions of all central government employees who have joined service after January 2004 will also be a part of the NPS.
The design of the NPS is simple. The POPs will be the front end, the National Security Depository Limited (NSDL) will be the record keeper and six entities selected by the PFRDA will be given the task of managing the funds.
The distinguishing feature of the NPS, when compared to any other type of investment, is that it's shockingly low cost.
To know more about this new system and the various plans - comprising of equity, government securities and corporate bonds - that it offers, pick up the March 2009 issue of Mutual Fund Insight.
The magazine's cover story talks in length about the NPS and its revolutionary design as well as its few downsides. Furthermore, in a exclusive interview, Dhirendra Swarup, head of PFRDA talks about the challenges and opportunities that lie ahead for the NPS.
“The NPS is voluntary in nature and there are no commissions in our system where a selling agent will push our product,” he says.
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