PFRDA looking to change cost structure for fund managers

By: |
September 19, 2020 5:10 AM

Currently, there are eight pension fund managers under NPS, including SBI Pension Funds, UTI Retirement Solutions and LIC Pension Funds.

While PFRDA looks to float RFP to attract new fund managers, there will be some entry barriers so that only serious players apply.PFRDA has made continuous efforts to make subscriber registration, exit process and processing other service requests seamless and subscriber friendly, it said.

The Pension Fund Regulatory and Development Authority (PFRDA) will soon come out with a request for proposal (RFP) to select new pension fund managers. The pension regulator is also looking to change the cost structure for fund managers as well as for the intermediaries selling pension schemes.

Supratim Bandyopadhyay, chairman, PFRDA, while speaking at CII’s 22nd Insurance and Pension Summit, said, “We are looking into cost benefit analysis and soon we will see some changes in the cost structures for pension fund managers and intermediaries.”

National Pension System (NPS), which is administrated and regulated by the PFRDA, currently charges 0.01% per annum for managing the scheme.

While PFRDA looks to float RFP to attract new fund managers, there will be some entry barriers so that only serious players apply.

“The RFP to select new fund managers should come out by December this year. Everybody is welcome, hopefully we will not be restricting the numbers but there will be some entry barriers so that only serious players come in,” said Bandyopadhyay.

Currently, there are eight pension fund managers under NPS, including SBI Pension Funds, UTI Retirement Solutions and LIC Pension Funds.

Officials in the pension industry also feel that while investors have delivered around 9-10% of returns in NPS in the past few years, but the rates of annuities are around 5-6% which is not attractive to a large number of investors. To address this issue, Bandyopadhyay feels that time has come for annuity products to give variable and market linked returns.

“It can be variable annuity or can be also linked to any benchmark. Like everybody today goes for a housing loan and they are used to floating rate. So why can’t there be annuities rates, which can be changed and linked to the markets. These are some of things which can be looked into,” said Bandyopadhyay.

Currently under the NPS, at least 40% of the accumulated pension wealth of the subscriber needs to be utilised for purchase of an annuity, providing for the monthly pension to the subscriber and the balance 60% is paid as a lumpsum to the subscriber. Even as 60% of the total money received at maturity from NPS is tax-free, but annuities are taxed in the hand of investors either as income from salary or income from other sources.

The Atal Pension Yojana (APY), which is also administered by the PFRDA, has seen positive response by investors in this financial year. In the current fiscal, more than two million new customers have joined APY. Over 4 lakh new customers have joined the scheme only in the first 15 days of the current month.

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