Pension regulator PFRDA has sweetened the deal for NPS subscribers in the ‘All Citizen Model’ and ‘Corporate Model’ categories. Such subscribers have now been given the added option to select their preferred fund managers for different asset classes.
Put simply, NPS subscribers’ choice has been widened and they can now opt for the best fund manager in the industry at an asset class level—equity, corporate debt and gilts.
This facility of selection of multiple pension funds has been capped at three funds. In effect, a NPS subscriber can choose a fund manager each for equity, corporate debt and gilts depending on their evaluation of consistent performance over the years, experts said. Hitherto, his option was limited to only one pension fund and choice of multiple fund managers was not allowed.
This latest facility to allow choice of multiple funds is available under the Active Choice (asset allocation) mode only, said a PFRDA circular.
“The facility of selection of multiple (maximum of 3) pension funds in accordance with the asset classes (except Alternate Asset Class or Scheme A) is available to the existing subscribers under NPS All Citizen Model (tier-I), NPS Corporate Model (tier-I) and tier-II (all subscribers)”, the circular added.
For new subscribers, this option would be applicable three months after their registration into NPS, it added.
Commenting on the latest PFRDA move, Sriram Iyer, CEO, HDFC Pension Fund Management Company said, “This is yet another progressive move by the PFRDA giving greater flexibility to NPS subscribers to choose their preferred manager based on performance at an asset class level.”
This move will also ensure that pension fund managers work hard at achieving superior risk adjusted returns to their subscribers in their effort to retain existing subscribers and attract new ones, Iyer told businessline.
HDFC Pension Management Company is the market leader in the all citizen model.
Rahul Bhagat, CEO, DSP Pension Fund Managers, said this is a welcome move as this gives Subscribers more flexibility and control over their investment strategy.
However, the effectiveness depends on the subscribers’ knowledge and ability to make informed decisions about fund managers for each asset class, he added.
“It can empower savvy investors but may pose risks for those less familiar with fund management,” Bhagat added.
“For fund managers, this change introduces increased competition and a need to demonstrate expertise in specific asset classes. They’ll need to work harder to attract and retain investors for their respective asset categories. It also challenges fund managers to differentiate themselves,” he added.
The assets under management (AUM) of National Pension System and Atal Pension Yojana (APY) has crossed the ₹10.5-lakh crore-mark in November this year, latest PFRDA data showed.
NPS took six years and six months to reach the milestone of ₹1-lakh crore AUM after its implementation in 2009. It then took four years and 11 months to further increase AUM to ₹5-lakh crore.
Then NPS AUM has doubled to ₹10-lakh crore from ₹5-lakh crore in just two years and ten months.
The AUM was ₹8.98-lakh crore as of March 31, 2023.