The Pension Fund Regulatory and Development Authority (PFRDA) will invite fresh bids to appoint pension fund managers (PFMs) to manage the corpus of the National Pension System (NPS), currently Rs 93,331 crore. While the existing fund managers have been appointed for three years, the new ones will have a tenure of five years.
“We are inviting bids from PFMs afresh to manage the pension fund of both government employees and non-government employees. The bids should be in place in a month or so,” said PFRDA chairman Hemant Contractor here on Friday, on the sidelines of a conference on NPS for autonomous bodies.
There are eight PFMs registered with PFRDA to manage funds — SBI Pension Fund, UTI Retirement Solutions, HDFC Pension Management, Reliance Capital Pension Fund, ICICI Prudential Pension Fund Management, Birla Sun Life, Kotak Mahindra Pension Fund, and LIC Pension Fund.
Of these, SBI Pension Fund, UTI and LIC are also the pension fund managers for government-sector employees. All the eight funds also manage private sector employees’ funds.
Contractor said PFRDA had approached the government to allow private sector fund managers to handle the funds of government employees.
Fund managers, including the existing ones, can participate in the bids that meet the eligibility criteria. Currently, any company wanting to be a fund manager for NPS has to have at least Rs 25 crore as net worth at all times.
According to Contractor, PFRDA is currently framing the structure including process of selection and method. The chairman also said revised investment norms for private sector employees would be notified soon. The regulator has already come out with changed norms for government-sector employees. The revised norms decreased allocation to government securities from up to 55 per cent to 50 per cent, while increasing it in corporate debt to 45 per cent from 40 per cent. However, investment allocation for equity remained same at 15 per cent. Private sector norms are also expected to be similar.
Budget for 2015-16 had announced giving employees a choice between Employees Provident Fund and NPS. Contractor said returns from NPS are a little higher than that by the former.
When asked if the Employees’ Provident Fund Organisation (EPFO)’s entry into exchange-traded funds from Thursday would give PFRDA tough competition, Contractor said, “It is a good thing… We operate in different markets. We are investing a little more our return is also higher.” There is no tax at the time of withdrawal in provident fund, while tax has to be paid on NPS, Contractor said its proposal for parity with EPFO was pending with the government.
Although central autonomous bodies (CABs) were mandated to enrol their employees in NPS after January 1, 2004, only 498 such bodies have registered so far, while 312 remain out of the scheme. Contractor said it is a mystery why all CABs did not join NPS. CABs include regulatory bodies, he said, adding EPFO employees also have NPS.
At the conference, the PFRDA chairman urged all CABs to adopt NPS, pointing out that any delay in decision making would go against the interest of employees.
“It is still not too late to decide on this. The most compelling reason for opting for NPS this year is the additional tax benefits that new subscribers will get this year,” said Contractor.