The Hindu Business Line : ‘Private players may be allowed as pension fund managers’

Mumbai, Feb. 1 Private players may be allowed to operate as pension fund managers, Mr D. Swarup, Chairman of the Pension Fund Regulatory Development Authority (PFRDA), said on Friday. But this development would take place once the PFRDA Bill is passed by Parliament, he added.

Under the New Pension Scheme, the pension fund regulator has already appointed State Bank of India (SBI), UTI Asset Management Company (UTI-AMC) and the Life Insurance Corporation (LIC) as pension fund managers through a competitive bidding process.

Meanwhile, the NPS is likely to get passed in the forthcoming Budget session of Parliament, he said. The NPS, introduced in 2004, will enable about 87 per cent of the total workforce in India, who do not have access to a formal pension scheme, to accumulate wealth to sustain them after retirement, he said.

The NPS for government employees is expected to start functioning from June 1, 2008.

Fund flow

After the NPS is cleared by the Government, more money from the pension fund may also flow into the equity market, he indicated. “Once the PFRDA Bill is passed by Parliament, the regulator will allow more investment choices that will allow up to 50 per cent of the pension wealth in equities,” Mr Swarup said.

The current Government guidelines provide that up to 15 per cent can be invested in equities and the balance 85 per cent in fixed income instruments. In the initial years, the Bill proposes to restrict investments through index funds and Exchange Traded Funds.

For the time being, pension funds will not be allowed to invest overseas, he said. “There are some indications that the returns can be as high as 75 to 80 per cent of their last remuneration,” Mr Swarup said.

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