The Hindu Business Line : Pension pie: Insurers seek level field with MFs

THE tussle for the Indian pension pie is getting hot, with the life insurance sector finding itself pitted against the mutual fund industry to fill up the limited slots that would be on offer for pension fund manager (PFMs).

With several mutual funds, both domestic and global, eyeing the eight licences that would be on offer for private sector PFMs, the insurance industry is seeking a level-playing field when the Pension Fund Regulatory and Development Authority (PFRDA) calls for bids.

``We (insurance companies) have no hang ups on mutual funds coming in as PFMs. But that does not seem to be the case on the opposite side,'' said Mr Stuart Purdy, Managing Director, Aviva Life Insurance Co, hinting that mutual funds could be still lobbying with the Government for an exclusive preserve.

Mr Purdy felt that insurance sector had the unique advantage over mutual funds of having an established distribution network that could be the key to the growth of the pension market. ``Pension and life insurance go hand-in-hand. Life insurers have the distribution capacities that could be critical for taking pension products to every corner of the country,'' Mr Purdy said.

He pointed out that the existing Indian life insurance companies together have a ready network of over 10 lakh agents. ``Pension products have to be sold. Having post offices as points of sale for pension products can be of limited help,'' Mr Purdy said.

The Aviva India Chief also said that he was uncomfortable with the reported decision of the PFRDA to place a cap on the number of PFMs. ``The market should find its own equilibrium. I think there should be no formal restrictions on numbers as it could lead to some deserving candidates being left out,'' he said.

Mr Purdy also said the decision to limit pension products that each PFM would be allowed to offer to a bouquet of three was ``very, very, structured.'' The products would be differentiated on their risk profile based on the extent of equity investment in each.

On Aviva's own plans, Mr Purdy said that that the company was very keen to take up a PFM licence.

``We are keen to participate,'' he said. He pointed out that Aviva is one of the few life insurers in the country with a fully functional investment section operating out of Mumbai.

The investment expertise could come in handy during accumulation stage of the pension cycle.

Mr Purdy mentioned that Aviva had already worked out tie-ups with banks that would add to its distribution muscle should the company finally acquire a PFM licence. ``Our tie-ups with banks gives us a network of 3,000 branches and a base of 3 crore potential customers,'' he said.

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