Expense Account, Mint
One of the reasons the new pension system (NPS) had got good previews before launch was due to the tiny costs the scheme carried. However, newspaper edits this week suggest that there is fine print to be looked at and that the product is not as cheap as touted.
The criticism also is that the product is elitist and does not work for a poor person who will invest the minimum Rs6,000 a year but will pay the same upfront cost as a person investing Rs1 lakh. Is there truth in this cost argument?
Any discussion on cost cannot be restricted to only one facet of the cost. A financial product carries at least three kinds of costs: You have to pay to get on the bus, that’s the entry load. You have to pay to ride the bus, that’s the annual recurring fund management and other annual administrative costs. And last, you pay to get off the bus, that’s the exit load.