As a major relief to private sector subscribers of National Pension System (NPS), the pension fund regulator has appointed a second central record-keeping agency (CRA), which will bring down the costs and help generate higher returns in the long run.
Pension Fund Regulatory and Development Authority (PFRDA) has appointed Karvy Computershare as the second CRA to service the new accounts till March 31 and after that function as a full-fledged CRA with interoperability functionality. At present, NSDL e-governance Infrastructure Ltd is the only CRA for NPS.
Option to switch
Subscribers would be provided an option to choose between NSDL e-governance and Karvy Computershare. From April 1, 2017, even existing subscribers will have the option to switch to Karvy, which has fixed the
account opening charge at R39.36, annual maintenance cost at R57.63 and transaction charge at R3.36. Facing competition, NSDL will lower its account opening charge to R40 from R50; reduce annual maintenance charge to R95 from R190 and transaction charge to R3.75 from R4. “Apart from giving choices to the subscribers to swap between two CRAs, Karvy’s entry into the domain is also expected to bring competition on the issue of charges charged by a CRA,” says a PFRDA note.
Role of CRA
A CRA is responsible for record-keeping, administration and customer service functions for all subscribers. The CRA charges (for NSDL) are deducted from the subscriber’s account on the last day of the calendar quarter. The billing cycle is three months, i.e., 26th of the last month of the previous quarter to 25th of the last month of the current quarter. In the last few years, the annual maintenance charges have come down from as much as R350 to R190 and transaction charges have dropped to R4 from R10.
The NPS account has four types of costs: central record-keeping charges, point of presence (PoP) charges, custodian charges, and pension fund management charges. Pension fund management, or fund management charge, is an annual fee paid to the fund managers for managing the subscriber’s money. Currently, this is 0.01% of the fund value. The distributor of the retirement account, or the PoP, charges an initial subscriber registration fee of R125. Charge for any subsequent transaction is 0.25% of the amount received from the subscriber, subject to a minimum of R20 and maximum of R25,000. The custodian charge is 0.0075% a year of the asset value held with the custodian, which is Stock Holding Corporation of India Ltd. Analysts say lower CRA charges will increase the returns for subscribers in the long run.