The Hindu Business Line : Govt may allow nine pension fund managers

In a big step forward in sparking off pension reforms, the interim Pension Fund Regulatory and Development Authority (PFRDA) and the Ministry of Finance have decided to limit the number of PFMs to nine.

While eight PFMs would be licensed from the private sector, the remaining slot will be filled up by a public sector entity. "We have taken a decision to limit the number of PFMs to nine including one public sector PFM in the initial stages," a top Finance Ministry official said.

When the Government had initially come out with its plans for reforming the pension sector it had decided to have a total of six PFMs including one from the public sector. However, with PFM hopefuls lobbying hard for higher numbers, officials had said that they would be reworking on the maximum number of players to be allowed.

The decision to impose a cap on number would in effect mean that the criteria for selecting PFMs would be tough , once the Government calls for bid to fill up the slots. All mutual funds and insurance companies, both domestic and global, are likely to be allowed to participate in the global bids to be called by the pension regulator.

However, officials said that the final decision on the criterion to be adopted for selection of PFMs is yet to be finalised. Among the issues being debated is whether to base the selection only on the criteria of lowest quotes on cost and expenses for managing the pension funds or to have a combination of factors such as past experience and assets under management, besides taking into consideration the cost and expenses factor.

"We expect to have a clear picture of the selection criteria within the next few weeks," officials said.

The Government is also working towards creating a Central Record-keeping Agency (CRA) that would maintain records of funds on behalf of PFMs and would facilitate portability for account holders.

Each PFM would be allowed to offer three schemes with varying degree of equity investment permitted under each thereby giving different degree of possible risk in the long-term.