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Can govt staff select own fund manager for NPS — PFRDA expects decision in a month

KR Srivats New Delhi | Updated on January 10, 2018

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Pension body pushing for flexibility on investment allocation

Pension regulator PFRDA is hopeful of a final government decision within a month over allowing the nearly three million Central government employees choose their own fund manager as well as investment allocation for their National Pension System (NPS) contributions.

Currently, Central government employees have no say on the matter of choice of fund manager or investment allocation, as both are decided by the government.

The equity allocation is currently capped at 15 per cent for government employees. All NPS contributions of Central government employees are being distributed evenly across three public sector fund managers — LIC Pension Fund, SBI Pension Fund and UTI.

For non-government employees, the equity allocation can be as high as 50 per cent.

“Our surmise is that within a month or so, the government will take the final call. We have been pushing for it for one year now. The committee set up under the aegis of Personnel Ministry with representation from Department of Financial Services has finalised its report,” Hemant Contractor, Chairman, PFRDA, told BusinessLine here on Monday.

Allow ‘same choices’

He said PFRDA had no information on the content of the report or whether the committee had recommended flexibility to government employees. The pension regulator had urged the Centre to allow Central government employees to have the “same choices” as available to non-government employees. This would mean government employees getting an option to take their equity allocation up to 50 per cent.

It may be recalled that the Seventh Pay Commission, too, had made a case for widening the choice for Central government employees. Chief Economic Advisor Arvind Subramanian has also supported such an initiative, stating that allowing a choice on selection of fund manager and investment allocation was “long overdue”.

Meanwhile, Contractor said the total corpus under NPS had crossed ₹2 lakh crore. About 85 per cent in value terms is accounted for by the government sector. The non-government sector’s AUM stood at about ₹30,000 crore.

Contractor said the issue of awarding licences to new pension fund managers (PFMs), who will for the first time operate under a “differential pricing” model for the private sector schemes of NPS, has been stuck on the issue of FDI in pension sector. “There had been a change in the FEMA guidelines, as a result of which the interpretation of foreign investment has undergone a change. We have held several rounds of discussions with the DFS,” he said.

Licences likely by year-end

Contractor said PFRDA was quite hopeful that licences would be awarded by the end of this calendar year.

Indications are that PFRDA will award licences to all the nine entities that had responded to its request for proposals (RFP) issued in September last year.

The nine bidders (three public sector and six from private sector) had bid for a management fee that ranged from 0.07 per cent to 0.1 per cent, industry sources said. In the RFP, the pension regulator had capped the investment management fee at 0.1 per cent a year.

This was the first time PFRDA had invited bids for appointment of PFMs, after its statutory recognition (PFRDA Act, 2013) and the framing of Pension Fund Regulations in 2015.

Ushering in “differential pricing” is expected to make the pension sector more “market-driven” and ensure that NPS subscribers can make an informed choice.



Published on September 11, 2017

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