Despite having lowest administrative cost between three to five basis points in the world, the nascent Indian pension funds market has already started witnessing tough competition to corner larger amount of funds to the system. The pension funds market with just three players-SBI Pension Fund, LIC Pension Fund and UTI Pension Fund- so far, the industry has become highly competitive even before the market within the architecture of New Pension Scheme (NPS) has taken off.
After being allocated Rs 2000 crore of Central government pension kitty, the three players are now competing to get mandate from 19 state government to manage their pension money.
Confirming the development H Sadhak, chief executive officer, LIC Pension Fund said, the fund is pitching for the pension money from few states at a very competitive rate.
”Yes, we are offering competitive fund management fees to the state governments to be in a position to get larger volume of pension money,?? said Sadhak. Sadhak believes that Life Insurance Corporation (LIC) with a huge fund exposure in the capital markets has some advantages for managing long-term funds. In addition to the competitive fund management fees, LIC Fund will be able to offer necessary and efficient services to the subscribers by leveraging the wide network of reach which LIC has developed, he explained.
However LIC Pension Fund would have its own small fund management team to manage the pension received from Central government and state governments. ”At the end of the year, we will be evaluated in terms of performance of funds and administrative cost to be eligible for higher amount of funds.?? Life Insurance Corporation was the first one to form its pension subsidiary composed of professionals.
Jagdish Capoor, former deputy governor, Reserve Bank of India, MN Singh, former police commissioner, Mumbai, TS Vijayan, chairman, LIC, Shailesh Haribhakti, well-known chartered accountant are the members of the LIC Pension Fund. Initially, there will be two schemes: one scheme with 100% investment in government securities and the other with 85% investment in debt instruments and 15% investment in equity and mutual funds schemes.
According to one estimate of a consultant, the corpus of NPS will increase from Rs 11 billion in 2007-08 to Rs 432 billion in 2012-13 and to Rs 1923 billion in 2016-17.