One of the most attractive features of the National Pension System or NPS is its very low expense ratio. The scheme was launched in 2004 to provide pension to the government employees, who joined their services on or after January 1, 2004, and the aim of the government was to keep the running expenses very low to avail maximum benefits to its employees.
The expenses were kept low even after general public was allowed to invest in the pension system from 2009 onwards and more privately-managed Asset Management Companies (AMCs) were allowed to manage the investments of NPS money.
However, the expense ratio of NPS will increase a bit now as the NPS Trust, which maintains NPS accounts and takes care of the assets and funds under the pension system, is allowed to recover administrative charges and expenses on daily accrual basis from the month of August this year.
Formed and regulated by the Pension Fund Regulatory and Development Authority (PFRDA), the NPS Trust is responsible for monitoring of the operational and service level functions of NPS and any other PFRDA-regulated pension scheme in the best interest of the subscribers.
NPS Trust General Manager Akhilesh Kumar, in a notice to all the NPS subscribers, says, “It is brought to the notice of all subscribers under National Pension System that, as approved by the Pension Fund Regulatory and Development Authority, NPS Trust will restart recovering administrative charges / expenses @ 0.005% per annum of the Asset under Management (AUM) on daily accrual basis to meet its expenditure. The same will be effective from 01/08.2019.”
However, even after the marginal rise of 0.005 per cent in administrative expenses, NPS will still have the advantage of least expensive scheme in comparison to other market-linked products like Equity-linked Savings Scheme (ELSS) and Unit-linked Insurance Plan (ULIP).