NPS (New Pension Scheme) was bad – I have rubbished it enough, but as if all that was not enough, the Parlimentarians have tried to make it worse.

Why should a fund management company have only 26% FDI beats me. Stumped is the word. In the 1990s we allowed 100% FDI in Mutual funds, in 2011 we are worried about 26% in pension funds.

We are worried about 51% in life insurance companies, and airlines. I guess I am too dumb to understand. We will not allow 100% FDI in retail – and it involves a HUGE investment, but we will allow 75% equity of Hdfc Bank and Icici bank to be held by foreigners. We will allow Hsbc and Citibank to sell LIFE INSURANCE and MUTUAL FUNDS to retail Indian customers – and be 100% held by foreigners.

Ok, so 26% it is.

Then there is a Minimum Guarantee that is to be paid! Vow. How the hell will this be implemented? who will bear the risk? What will be the time frame? I mean if I am a 22 year old starting an account, when will the guarantee kick in? Every year or only at the time of the withdrawal? Thoughtless suggestions hurt the industry.

Having said that, I have seen the returns that clients have got in the DEBT schemes of the NPS – the standard deviation confirms my worst fears – easier to find a decent equity manager, but finding a decent debt fund manager seems to be impossible. That is scary. If one fund manager gives you 1%p.a. and another gives you 8%p.a.  – what are people supposed to do?

I can imagine a shrill discussion (shout session?) on Tv after which many people will move from the fund with 1% return to the fund with 8% return. Next year there will a ‘Return Reversal’ – and lo! the same people will again be in a discussion. God bless them all. I will be watching Comedy Circus.

Then there is another clause which they want to insert- The Withdrawal Clause- The very purpose of creating a pension plan is to lock it in for a person’s old age or to meet a critical illness post say, 55 years of age. There is no point in allowing a scooter loan, daughter’s marriage, wife’s remarriage, painting the house,…blah blah kinda loans. To beat this very thing a 2 tier NPS was created (or so I thought, my mistake!). Tier I (compulsory) NPS does not have a withdrawal facility but Tier II (optional) has a withdrawal option. Younger people should obviously open both and accumulate MORE in the tier II account. Frankly did not think this was rocket science. I think the parlimentarians were not briefed well by the experts and hence this suggestion – I hope this suggestion is not taken too seriously. The very purpose of creating a Tier I and Tier II would be lost.

One thing I have been screaming about is – Can the PFRDA say what will happen to the accumulated amounts? How can it be withdrawn? Will the protect it by a specific provision in the Sec 10 of the I T Act, 1961?

Will they say Rs. 25L will be automatically transferred to SENIOR CITIZEN ACCOUNT AND the account holder and his spouse WILL get an assured return of 12% p.a. FOR THE REST OF THEIR lives (9% interest and 3% return of capital) – without any money going to the heirs? Some people who live till 90years will be some kind of a drain, but those who die at 63 years of age will give a HUGE surplus! Of course these nos. are arbit – actuaries can work out better numbers. There should obviously no ‘asset management charges’ – and all this should happen from the Government’s consolidated fund. Here there may be a sense of subsidy, but at least there will be no guarantees during the accumulation stage!

What say Gautam Bharadwaj of IIEF and other pension experts?