NPS: Why no one wants to be a retirement adviser in India

With 72% taxpayers moving to new tax regime offering no NPS deduction, demand has fallen

- Sashind Ningthoukhongjam

New voluntary enrollments in the National Pension System (NPS), the government-backed market-linked retirement plan, is declining—from 872,000 in 2021-22 and 863,000 in 2022-23 to 803,000 in 2023-24.

Experts attribute the cooling interest to the growing appeal of the new tax regime, which offers no benefits on NPS contributions, and to weak distributor incentives that have kept retirement advisory from gaining traction.

There are only 63 retirement advisers (RAs), according to the latest numbers available with the Pension Fund Regulatory and Development Authority (PFRDA), which had introduced the licence in 2016. And those also had close to no clients.

Aarathi Rajgopal took the RA licence with high hopes after clearing NISM-Series-XVII: Retirement Adviser Certification Examination, but she has yet to service a single client. The key reason, she said, is the low monetary incentive.

If a client invests 10 lakh in the NPS, Rajgopal can charge at most ₹200 as account-opening fees, ₹1,000 a year in advisory fees, and an additional ₹100 per transaction. Now, if the client were to invest the amount in equity mutual funds, she could earn about ₹8,000 every year (assuming 0.80% commissions) through an AMFI (Association of Mutual Funds in India) registration.

If the amount were put into annuity, which are closer to the NPS, earnings would be higher still. Life insurers typically pay upfront commissions, as high as 35% for the first year's premiums and 1-7% from the second year onwards.