Asking to examine the maintainability of sustainability of high returns of over 10 percent to government employee National Pension System (NPS) subscribers, PFRDA chairman Hemant Contractor today expressed concern.
Asking to examine the maintainability of sustainability of high returns of over 10 percent to government employee National Pension System (NPS) subscribers, PFRDA chairman Hemant Contractor today expressed concern. Interest rates are on the decline and maintaining the rate in double digits can create a problem. There are three government-managed pension funds hired by the Pension Fund Regulatory and Development Authority of India (PFRDA) which include SBI Pension Funds, UTI Retirement Solutions and LIC Pension Fund. These pension funds offer returns in the range of 10.16-10.52 percent to central government employees. The interest rate falls for the state level in the range of 10.16-10.31 percent. Contractor while talking to PTI said,”On the sustainability of returns, we have been talking to the government because now the interest rates are coming down. So, the returns that we get on debt instruments would come down. Therefore, we do need to look at instruments like lifecycle funds in order to broad base the investment and get better returns. We do need to restructure”.
Reportedly, Employees Provident Fund Organisation (EPFO), the retirement fund body lowered the interest rate from 8.8 percent to 8.65 percent in the 2016-17 fiscal year.
The PFRDA has a total of eight fund managers that manage pension funds. Other than the three government-managed funds, five are privately managed. The private funds are ICICI Prudential Fund Management, Reliance Capital Pension Fund, Kotak Mahindra Pension Fund, HDFC Pension Fund Management and Birla Sun Life Pension. As of March 31, 2017, the total asset under management (AUM) by all these funds was recorded to be Rs 1.75 lakh crore, which grew to Rs 2.06 lakh crore by September 30.
According to Contractor, the subscriber base of the pension schemes run by the PFRDA has been growing, mainly driven by growth in user base every day. The overall subscriber base of the pension regulator was 1.81 crore as on October 31. There were 1.54 crore subscribers by the end of fiscal ended March 2017.