The New Pension Scheme has decided to break through to the vast majority of the workers in the unorganised sector, who are not financially capable of meeting the minimum investment needs to qualify for pension. The proposal would also allow approximately 400-million workers, a large percentage of which is barely literate to get free advice from a nodal group about which scheme would suit them the most.

The Pension Fund Regulatory and Development Authority (PFRDA) is planning a low-cost pension scheme that would cost the workers far less than the current annul contribution threshold of Rs 6,000. That threshold works out to 16% of the annual income of an individual, estimated at Rs 37,490 per year, according to the latest data released by the government’s Central Statistical Organisation.

The regulator had set the minimum investment limit of Rs 6,000 per year when it opened up for private citizens on May 1 this year.

Under the proposal, an NGO or a self-help group, representing marginal workers, would open a main account with the NPS. Workers would then be able to have sub-accounts with individual records of investments and returns. The main account operator would be responsible for choosing the investment option and would also have to pay the maintenance and fund management fees—another issue that seems to have hindered workers from joining the scheme.

Under the scheme, account holders have to pay Rs 50 for opening an NPS account, an annual maintenance fee of Rs 350 to the National Securities Depository Ltd, which is the central record-keeping agency, and another Rs 10 for every subsequent transaction. Moreover, they also have to pay charges to the point of presence and the fund manager.

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