PFRDA eases norms for registration of fund managers
New Delhi: In order to boost the National Pension Scheme (NPS), PFRDA on Thursday relaxed norms for registration of pension fund managers to ensure greater competition by removing cap on the number of PFMs.
As per the revised guidelines, Pension Fund Managers (PFMs) would have to market the NPS to the potential subscribers, deciding their own marketing and distribution channels as per their business perceptions, Finance Ministry said in a statement.
The new norms issued by PFRDA on the basis of the recommendation by G N Bajpai Committee, has done away with the bidding process for appointment of fund managers.
It has laid down the eligibility criteria for PFMs and also removed the limitation on the number of fund managers for for managing the retirement corpus under non-government and private sector segment. Henceforth, any eligible company can undertake the business of fund management under the NPS.
Under the revised norms, PFMs have been given freedom to fix their own fees.
"It is expected that this would provide for an economically viable business model for the PFMs attracting a fresh set of entrants into the pension industry, and the resultant competition would ensure market driven fee structures, which would work to the advantage of the pension subscribers," the statement said.
NPS, launched for all citizens in May 2009, failed to take off due to lack of sales push. So far it has attracted about 50,000 individual buyers of the over 400 million workforce. The minimum annual contribution to NPS is Rs 6,000.
The Pension Fund Regulatory and Development Authority (PFRDA) had set up the Bajpai committee in August 2010 to suggest measures to fast-track and popularise retirement scheme for individuals, including those in the informal sector under NPS.
As per the revised norms, the fund manager would have to meet the eligibility criteria, including, financial integrity, absence of convictions or civil liabilities and competence requirements to be eligible as a PFM for the NPS.
"The PFM can now fix the Investment Management Fee to be charged to the subscribers subject to a ceiling/cap, as may be prescribed by the Authority from time to time," the guideline said.
Such fee is inclusive of all transaction related charges such as brokerage, transaction cost, but exclusive of all applicable taxes, it said.
The certificate of registration granted to the PFM would be reviewed annually and is required to deposit a minimum fee of Rs 10 lakh per year.
At present seven fund houses; LIC Pension Fund, SBI Pension Funds, UTI Retirement Solutions, IDFC Pension Fund Management Company, ICICI Prudential Pension Fund Management, Kotak Mahindra Pension Fund and Reliance Capital Pensions Fund; manage investment corpus of investors.
As on March 31, 2011, the total assets managed by all the pension fund managers amounted to Rs 8,585 crore.
The selected PFM shall be required to incorporate the Pension Fund as a separate company. Also foreign investment in the Pension Fund should not exceed 26 per cent of the paid up share capital.
The Bajpai Committee had suggested substantial lowering of the cost of buying NPS, besides providing incentives to distributor, which could help in increase in sales the scheme.
The Committee had suggested that pension fund managers should be allowed to sell NPS by incorporating subsidiaries or appointing intermediaries. It also called for an increase in the number of pension funds allowed to manage the huge corpus.