NPS fund managers: All bidders to get licence

In a significant move, pension regulator PFRDA has decided to award pension fund manager (PFM) licences to all the nine entities that had bid for managing private sector schemes of the National Pension System, a top official said.

“All the nine are going to get it. Our board had recently discussed it and decided to this effect. They (nine bidders) were meeting all the criteria and there is no reason to reject any of them,” Hemant Contractor, Chairman, PFRDA, told BusinessLine here on Wednesday.

Contractor said the names of these nine entities would be formally announced in the next 10 days by when the minutes of the board meeting are expected to be ready.

This PFRDA decision is significant as it will be for the first time ever that PFMs will operate under a “differential pricing” model for managing the private sector schemes of NPS.

Ushering in “differential pricing” is expected to make the pension sector more “market-driven” and ensure that NPS subscribers can make an informed choice. Allowing differential pricing is expected to open a new area of competition, bring in competition among PFMs in terms of fee structure and service standards.

PFRDA had, in September last year, issued the request for proposals (RFPs) for appointing new PFMs.

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

There were nine bidders — six from the private sector and three from the public sector.

They had bid for a management fee that ranged from 0.07 per cent to 0.1 per cent. In the RFP, the pension regulator had capped the investment management fee at 0.1 per cent per annum (10 basis points).

Currently, private sector schemes — with assets under management (AUM) of about ₹15,000 crore — are being managed by eight professional pension funds, including three from the public sector.

The new PFMs — who will operate under the differential pricing model — will have to again register with the PFRDA. They have to fulfil a minimum net worth of ₹50 crore for both the sponsor and the Pension Fund. Also, this time round, it has been specified that a PFM can be appointed for a maximum period of five years. No specific time period was earlier mentioned.

Contractor said the PFRDA has made two recommendations to the government so as to expand the scope of Atal Pension Yojana (APY), a guaranteed pension scheme for the unorganised sector.

“We want to increase the eligibility age band from 18 to 40 years to 18 to 50 years. We also want to increase the amount of pension. Right now it is available from ₹1,000 to ₹5,000.

The feedback we are getting from the market is that pension of ₹5,000 at age of 60 is not much,” Contractor said.

As on date, the number of APY subscribers is 46 lakh with contribution of about ₹1,400 crore.

Meanwhile, Contractor said he was quite hopeful that government employees (who had subscribed to NPS) too would soon be allowed to have a wider choice of PFMs with flexibility of higher percentage of their contributions going into equities.

As on date, government subscribers account for 88 per cent of the total NPS corpus. “The government seems to be favourably inclined to the idea. We are hopeful,” Contractor added.

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