HDFC Pension Fund also been finding it difficult to enrol people in younger age-bracket
Four months after the Pension Fund Regulatory and Development Authority (PFRDA) Bill that gives regulatory status to the pension sector regulator has been passed, fund managers in this segment have seen a mark increase in the number of clients. However, attracting young professionals has continued be a challenge for these companies and hence they have adopted new strategies to cater to this segment. The pension fund managers distribute products under National Pension System (NPS). The NPS is a new contributory pension scheme launched by Government of and is regulated by Pension Fund Regulatory and Development Authority (PFRDA).
Under the NPS, you can regularly invest your money into your pension account and have an option of taking a part of the corpus as lump sum amount and the balance in form of fixed monthly income. It was first introduced for government employees and then in end 2009 for all citizens of India. Though there is a tax benefit under Section 80C of the Income Tax Act, younger employees in the age-group of 25-35 years do not want to purchase the product. The major reason attributed by the industry players for this, is that these professionals do not want to think about retirement at an early age. Take HDFC Pension Fund for example.
Similar to the other fund managers in the NPS space, they have also been finding it difficult to enrol people in the younger age-bracket into NPS. Sumit Shukla, Chief Exectuive Officer of HDFC Pension Management Company explained that it is the middle and senior management in companies who want to opt for these products. “To attract younger talent to NPS, we tied-up with BPOs, since they have a relatively younger employee mix. Here, about 40 educational sessions were held where the scheme was introduced to these employees. Post this, we had about 125 forms coming in, for joining NPS,” said Shukla. The company has also adopted the audio-visual method to get more such professionals take NPS. Shukla informed that they have also created an awareness video about how NPS makes retired life more joyful, in order to get youngsters interested. For the future, HDFC Pension Management is also investing in technology to make NPS easier to subscribe to and more accessible.
To subscribe to NPS, one should be between 18 - 60 years of age as on the date of submission of his/her application to the POP / POP-SP. Point of Presence (POP) is the interface between the corporate/subscribers and the NPS architecture. POP-Service Providers (POP-SPs) are the designated branches of registered PoP(s) to extend the reach of NPS. In order to invest in an NPS, it is mandatory for an individual to open a Tier I NPS account where withdrawal is not allowed. However, after opening the Tier I account, you can start a Tier II account where partial withdrawal is allowed. Up to 20% of the funds can be withdrawn from NPS before one turns 60; the rest has to be used to buy annuity. The thrust is also on digital media initiatives. Anil Ghelani, Business Head and Chief Investment Officer, DSP BlackRock Pension Fund Managers said that their marketing strategy is aiming to build a strong connect with the young generation.
“Recognizing that wealth creation including saving for retirement is a long term process and it needs to start at a young age. Connecting with the youth thus is essential for introducing and educating them about investment products traditionally considered by more mature audiences,” he said. At DSP BlackRock Pension Fund Managers, they are focusing on digital media initiatives. Ghelani added that even the team at DSP BlackRock working on this business is constituted of primarily young individuals that can help take out the message in a much more relatable manner.
The Pension Fund Managers for Government Sector NPS are LIC Pension Fund, SBI Pension Funds and UTI Retirement Solutions. The Pension Fund Managers for Private Sector NPS apart from the above three are HDFC Pension Management Company, ICICI Prudential Pension Funds Management Company, Kotak Mahindra Pension Fund, Reliance Capital Pension Fund Ltd and DSP BlackRock Pension Fund Managers. Apart from these initiatives, industry players feel that changes in the technology interface would also be essential to get youth interested.
They informed that further taxation changes would also be welcome, given that the pension earned after retirement is taxable at slab rate for NPS. A senior official from a pension fund manager operating in the NPS space in both private and public sector said that the enrolment process should also be made simpler. “Similar to products like insurance and banking, online processes would be more effective in getting people of a young age interested.
Further, mobile applications to purchase NPS and check its fund value on a regular basis would be beneficial,” the official added. He also said that the industry is looking to bring out simpler enrolment forms that only have four to five basic questions. At present, online purchase of NPS is not allowed. However, sources indicated that the finance ministry and PFRDA are considering this proposal seriously and changes could be made to facilitate it in the near future.
Source: BS
Four months after the Pension Fund Regulatory and Development Authority (PFRDA) Bill that gives regulatory status to the pension sector regulator has been passed, fund managers in this segment have seen a mark increase in the number of clients. However, attracting young professionals has continued be a challenge for these companies and hence they have adopted new strategies to cater to this segment. The pension fund managers distribute products under National Pension System (NPS). The NPS is a new contributory pension scheme launched by Government of and is regulated by Pension Fund Regulatory and Development Authority (PFRDA).
Under the NPS, you can regularly invest your money into your pension account and have an option of taking a part of the corpus as lump sum amount and the balance in form of fixed monthly income. It was first introduced for government employees and then in end 2009 for all citizens of India. Though there is a tax benefit under Section 80C of the Income Tax Act, younger employees in the age-group of 25-35 years do not want to purchase the product. The major reason attributed by the industry players for this, is that these professionals do not want to think about retirement at an early age. Take HDFC Pension Fund for example.
Similar to the other fund managers in the NPS space, they have also been finding it difficult to enrol people in the younger age-bracket into NPS. Sumit Shukla, Chief Exectuive Officer of HDFC Pension Management Company explained that it is the middle and senior management in companies who want to opt for these products. “To attract younger talent to NPS, we tied-up with BPOs, since they have a relatively younger employee mix. Here, about 40 educational sessions were held where the scheme was introduced to these employees. Post this, we had about 125 forms coming in, for joining NPS,” said Shukla. The company has also adopted the audio-visual method to get more such professionals take NPS. Shukla informed that they have also created an awareness video about how NPS makes retired life more joyful, in order to get youngsters interested. For the future, HDFC Pension Management is also investing in technology to make NPS easier to subscribe to and more accessible.
To subscribe to NPS, one should be between 18 - 60 years of age as on the date of submission of his/her application to the POP / POP-SP. Point of Presence (POP) is the interface between the corporate/subscribers and the NPS architecture. POP-Service Providers (POP-SPs) are the designated branches of registered PoP(s) to extend the reach of NPS. In order to invest in an NPS, it is mandatory for an individual to open a Tier I NPS account where withdrawal is not allowed. However, after opening the Tier I account, you can start a Tier II account where partial withdrawal is allowed. Up to 20% of the funds can be withdrawn from NPS before one turns 60; the rest has to be used to buy annuity. The thrust is also on digital media initiatives. Anil Ghelani, Business Head and Chief Investment Officer, DSP BlackRock Pension Fund Managers said that their marketing strategy is aiming to build a strong connect with the young generation.
“Recognizing that wealth creation including saving for retirement is a long term process and it needs to start at a young age. Connecting with the youth thus is essential for introducing and educating them about investment products traditionally considered by more mature audiences,” he said. At DSP BlackRock Pension Fund Managers, they are focusing on digital media initiatives. Ghelani added that even the team at DSP BlackRock working on this business is constituted of primarily young individuals that can help take out the message in a much more relatable manner.
The Pension Fund Managers for Government Sector NPS are LIC Pension Fund, SBI Pension Funds and UTI Retirement Solutions. The Pension Fund Managers for Private Sector NPS apart from the above three are HDFC Pension Management Company, ICICI Prudential Pension Funds Management Company, Kotak Mahindra Pension Fund, Reliance Capital Pension Fund Ltd and DSP BlackRock Pension Fund Managers. Apart from these initiatives, industry players feel that changes in the technology interface would also be essential to get youth interested.
They informed that further taxation changes would also be welcome, given that the pension earned after retirement is taxable at slab rate for NPS. A senior official from a pension fund manager operating in the NPS space in both private and public sector said that the enrolment process should also be made simpler. “Similar to products like insurance and banking, online processes would be more effective in getting people of a young age interested.
Further, mobile applications to purchase NPS and check its fund value on a regular basis would be beneficial,” the official added. He also said that the industry is looking to bring out simpler enrolment forms that only have four to five basic questions. At present, online purchase of NPS is not allowed. However, sources indicated that the finance ministry and PFRDA are considering this proposal seriously and changes could be made to facilitate it in the near future.
Source: BS
