Planning to open an NPS account? Choose your fund house carefully or pay much more

NPS account: The National Pension System (NPS) is a voluntary retirement scheme that allows an investor to invest in both debt and equity with a single window. What they need is to choose the ratio in which their debt and equity exposure will exist. Till 31st March, 2021, it didn't matter where you opened an NPS account. But, from 1st April 2021, you should choose your fund house carefully while opening your NPS account. Because from 1st April, Pension Fund Regulatory and Development Authority (PFRDA) has allowed pension fund managers to charge more. The PFRDA has approved a slab that is on the basis of fund houses' AUM (Asset Under Management).

NPS charges slab
The PFRDA has set it at 0.09 per cent for AUM up to Rs 10,000 crore. PFMs with AUM from Rs 10,001 crore to Rs 50,000 crore will be allowed to charge fees up to 0.06 per cent. Those with AUM from Rs 50,001 crore to Rs 150,000 crore will be allowed to charge fees up to 0.05 per cent. Finally, PFMs with AUM above Rs 150,000 crore will be allowed to charge a maximum fee of 0.03 per cent.

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On how this new NPS charges slab will impact NPS account holders, Manikaran Singhal, Founder at goodmoneying.com said, "From 1st April 2021, NPS account holders will have to fish out more money for their pension managers' charges. However, they can contain these charges by choosing their fund houses, which have higher AUM."

Singhal advised those who want to open NPS account to pick their fund house from HDFC, UTI, SBI, etc. that have higher AUM. He said that higher AUM would mean lower AUM charges for the NPS account holders from 1st April 2021.