The State Bank of India, UTI Asset Management Company Private Limited and Life Insurance Corporation of India have been appointed pension fund managers to handle a corpus of Rs 2,000 crore under the new pension system (NPS). Seven public sector entities, including Canara Bank, IDBI Capital Market Services Ltd, Securities Trading Corporation of India and Punjab National Bank and these three companies, had evinced interest to operate as PFMs.

?The new system would be operational by January 1, 2008, now that we have been able to appoint the PFMs,? D Swaup, chairman, PFRDA told FE. He said depending on the size of the corpus, the number of PFMs had been decided.

At present, there are about five lakh subscribers to the new system. All central government employees who joined the services from January 1, 2004 are under the NPS. Besides, 19 state governments, along with a host of autonomous bodies, have also joined the NPS.

Earlier, the PFRDA had appointed National Securities Depository as the central record keeping agency. However, the contract between PFRDA and NSDL is under finalisation. Work relating to CRA activities will commence as soon as NSDL obtains the necessary approvals from the Securities and Exchange Board of India (Sebi).

As per an interim investment pattern approved by the government 5% of the pension fund could be invested in equities. This is in accordance with the pattern prescribed for non-government provident funds.

The total expenditure of the central government on pension payments to its retired employees (including telecom) has gone up from Rs 3,272 crore in 1990-91 to Rs 28,963 crore in 2005-06. As a percentage of net tax revenue the total pension outgo has increased from 7.6% in 1990-91 to 10.56% in 2005-06. The compound annual growth rate of the pension outgo of the central government was 17% during this period.

As per the PFRDA eligibility criteria, PFMs needed to have a minimum capital base of Rs 10 crore. All the PFMs were also required to have at least five years experience of fund management and average assets under management of not less than Rs 10,000 crore.