Experts attribute the cooling interest to the growing appeal of the new tax regime, which offers no benefits on NPS contributions, and to weak distributor incentives that have kept retirement advisory from gaining traction.
There are only 63 retirement advisers (RAs), according to the latest numbers available with the Pension Fund Regulatory and Development Authority (PFRDA), which introduced the licence in 2016.
And those also had close to no clients.
Aarathi Rajgopal took the RA licence with high hopes after clearing the NISM-Series-XVII: Retirement Adviser Certification Examination, but she has yet to service a single client.
The key reason, she said, is the low monetary incentive.
If a client invests ₹10 lakh in the NPS, Rajgopal can charge at most ₹200 as account-opening fees, ₹1,000 a year in advisory fees, and an additional ₹100 per transaction.
Now, if the client were to invest the same amount in equity mutual funds, she could earn about ₹8,000 every year (assuming 0.80% commissions) through an AMFI (Association of Mutual Funds in India) registration.
If the amount were put into annuity plans, which are closer in nature to the NPS, her earnings would be higher still. Life insurers typically pay huge upfront commissions, as high as 35% for the first year’s premiums and 1-7% from the second year onwards.
That’s why, when Rajgopal’s RA licence came up for renewal on 31 January, she chose not to continue. Now, she simply directs clients to open accounts directly with central recordkeeping agencies (CRAs) such as NSDL andCAMS if they want to invest in the NPS.
“The RA framework was created so that there is a champion for the NPS as a product. Given that distributors today handle multiple products—they are not just distributing the NPS but all financial products—the commercial considerations play a big part in either enticing them to distribute it or not. That’s a reality,” said Sriram Iyer, managing director and chief executive, HDFC Pension Fund Management Ltd.
The new tax regime effect
The NPS appeal is also waning because more taxpayers are shifting to the new tax regime. To be sure, 72% of taxpayers opted for the new tax regime in 2023-24, showed data from the Central Board of Direct Taxes.
“The NPS used to sell like hot cakes, but with more people adopting the new tax regime, it’s no longer a popular choice among clients,” said Makesh Sivasankar, founder of SAMISH Investment Services, which has partnered with HDFC Pension as its pension agent.
Under the old tax regime, individuals can claim deductions of up to ₹1.5 lakh on NPS contributions under Section 80C, plus an additional ₹50,000 under Section 80CCD(1B). “Many people would invest ₹50,000 every year to avail the 80CCD(1B) benefit,” said Sivasankar.
Although Section 80C and 80CCD(1B) deductions are not available under the new tax regime, employers’ NPS contributions—up to 14% of basic pay—are still tax-deductible for both government and private sector employees. That’s why platforms like PensionBox are focusing more on partnering with corporations than chasing individual retail clients.
“The retail side of the NPS will take a hit going forward,” said Kuldeep Parashar, CEO and founder of PensionBox, backed by Rainmatter by Zerodha.
Enter pension agents
In 2024, the PFRDA introduced an alternative to the RA licence by allowing individuals to work as pension agents. Unlike RAs, they do not register directly with the regulator but instead operate as agents of NPS Points of Presence (PoPs)—entities authorized to open NPS accounts. This eased the compliance burden, as individuals don’t need to register directly with the PFRDA.
The model is simple. PoPs have fixed fee structures, and when pension agents bring them business, they share a part of the revenue with the agents.
A PoP can charge a maximum of ₹400 for opening an account and 0.50% commission for new contributions, with a cap of ₹25,000 per client. They can also charge a small persistence fee—up to ₹100—if the NPS subscriber invests a certain amount every year and keeps the account active. There is no commission on the total assets under management (AUM).
However, Parashar from PensionBox said PoPs and pension agents face the same hurdle—low monetary incentives.
Besides, since the NPS comes with multiple choices and complex withdrawal and annuity rules, it requires significant sales effort, and the low monetary incentives make it even harder to sell at scale, added Abhishek Kumar, a registered investment adviser (RIA) and founder of SahajMoney.
“Since it was never actively marketed, it also couldn’t achieve top-of-mind recall as a retirement solution. With reduced recall and no tax benefits, the NPS has shifted from a pull product to a push product—especially for PoPs in physical settings, where retirement-focused investing intent is low. Push-driven distribution raises costs, while remuneration remains minimal,” said Santosh Navlani, chief operating officer of ET Money.
The smart thing to do
Harsh Roongta, RIA and founder of Fee Only Investment Advisers LLP, said that given the long-term and illiquid nature of pension products, they usually need either compulsion or tax incentives to gain traction. “For government employees, the mandatory contributions ensure participation. For the private sector, the tax breaks on corporate deductions help. But beyond these groups, the NPS remains a hard sell for the general public,” he noted.
He added that even the tax benefits on employer contributions face a practical limit. “The overall ceiling of ₹7.5 lakh a year is largely absorbed by Employees’ Provident Fund contributions, leaving little room for additional NPSadvantages.”
He said the government should consider giving employees an option to choose between the EPF and the NPS to increase adoption among private sector employees.
Parashar said the distribution commission for PoPs should be charged to the AUM and not the contribution. Users who want lower fees can open accounts with the CRAs, just like direct mutual fund plans.
“We can keep the NPS expense ratio lower than mutual funds with the lowest total expense ratio, but we should shift to an AUM model for charging distribution commission. In the US, 401(k) and Roth IRA plans have an AUM model of distribution,” he said.
“Given that the NPS is designed to help the customer build a meaningful retirement corpus, the focus is also on keeping costs low and aiding the compounding journey to maximize the terminal value for the client at the time of retirement,” clarified Iyer from HDFC Pension.
