The National Pension Scheme (NPS) is one of the lowest cost products available in India, as the table below shows. However, unlike mutual funds, the charges for NPS are not all bundled into a single figure of ‘expense ratio’. Most of its charges are extremely low as the table below shows. The two most significant among them are the subscriber contribution charge and the pension fund manager charge.
Subscriber Contribution Charge
This is set at Rs 125 for the first contribution and 0.25% of your contribution for subsequent occasions when they are made through a PoP (Point of Presence), typically your bank. In other words, if you contribute Rs 50,000 per annum, the subscriber contribution charge is Rs 125 for each year’s contribution.
However, if you contribute this amount through eNPS (enps.nsdl.com or enps.karvy.com), this charge is reduced to 0.1% and is paid to the PoP that you used to open initially open the account. Thus for a Rs 50,000 contribution, you will be charged Rs 50.
However, if you do contribute through eNPS, remember to contribute through net banking using payment gateways such as SBI ePay or BillDesk. Paying through debit or credit card will attract additional charges of around 0.5% by your bank.
Pension Fund Manager Charge
This is capped at just 0.01%. Thus if your NPS corpus is Rs 5 lakh, the fund manager can only levy a charge of Rs 50. The Pension Fund Regulatory Development Authority (PFRDA) is considering a proposal to increase this 10 times over to 0.1%, but this has not yet been notified. However, even after what looks like a steep hike, the charge would be much lower than corresponding mutual fund expense ratios of 2-2.5%.
|Intermediary||Charge head||Service Charges*|
|CRA (Central Record-Keeping Agency)||Account Opening charges||NSDL Rs 40 or Karvy Rs 39.36||Rs 15|
|Annual Maintenance cost per account||NSDL Rs 95 or Karvy Rs 57.63||NSDL Rs 25 or Karvy Rs 14.40|
|Charge per transaction||NSDL Rs 3.75 or Karvy Rs 3.36||Free|
|POP (Point-of-Presence)||Initial subscriber registration and contribution upload||Rs. 125||NA||NA|
|Any subsequent transactions||0.25% of contribution,||NA||NA|
|Min. Rs 20 Max. Rs 25000|
|Custodian||Asset Servicing charges||0.0032% p.a for Electronic segment & Physical segment|
|Pension Fund Manager charges||Investment Management Fee||0.01% p.a.||0.0102% p.a.|
|NPS Trust||Reimbursement of Expenses||0.01% p.a|
So how much is actually charged? Let us take a hypothetical case of someone contributing Rs 50,000 through NSDL in year one.
He would have paid Rs 40 (account opening charge) + Rs 95 (annual maintenance charge) + Rs 125 (initial subscription charge) + Rs 1.6 (asset servicing charge) + Rs 50 (investment management fee) + Rs 50 (NPS Trust Expenses). This works out to Rs 361.6 or about 0.7% of his corpus which is far lower than charges for mutual funds or pension plans of insurance companies.
There are two additional minor charges for the NPS:
- For the address change, fund manager change and other such transactions within the NPS set-up. This charge is Rs 20 per transaction.
- A persistency incentive of Rs 50 per annum for every year completed in the NPS. This is paid to your PoP.