- The Hindu Business Line
- KR SRIVATS
Asian stocks rose strongly on Monday after Hurricane Irma weakened and
North Korea marked a weekend holiday with celebrations but refrained
from launching more missiles, giving investors some relief Pension
regulator PFRDA is hopeful of a final government decision within a month
over allowing the nearly three million Central government employees
choose their own fund manager as well as investment allocation for their
National Pension System (NPS) contributions.
Currently, Central government employees have no say on the matter of
choice of fund manager or investment allocation, as both are decided by
the government.
The equity allocation is currently capped at 15 per cent for government
employees. All NPS contributions of Central government employees are
being distributed evenly across three public sector fund managers — LIC
Pension Fund, SBI Pension Fund and UTI.
For non-government employees, the equity allocation can be as high as 50 per cent.
“Our surmise is that within a month or so, the government will take the
final call. We have been pushing for it for one year now. The committee
set up under the aegis of Personnel Ministry with representation from
Department of Financial Services has finalised its report,” Hemant
Contractor, Chairman, PFRDA, told BusinessLine here on Monday.
Allow ‘same choices’
He said PFRDA had no information on the content of the report or whether
the committee had recommended flexibility to government employees. The
pension regulator had urged the Centre to allow Central government
employees to have the “same choices” as available to non-government
employees. This would mean government employees getting an option to
take their equity allocation up to 50 per cent.
It may be recalled that the Seventh Pay Commission, too, had made a case
for widening the choice for Central government employees. Chief
Economic Advisor Arvind Subramanian has also supported such an
initiative, stating that allowing a choice on selection of fund manager
and investment allocation was “long overdue”.
Meanwhile, Contractor said the total corpus under NPS had crossed ₹2
lakh crore. About 85 per cent in value terms is accounted for by the
government sector. The non-government sector’s AUM stood at about
₹30,000 crore.
Contractor said the issue of awarding licences to new pension fund
managers (PFMs), who will for the first time operate under a
“differential pricing” model for the private sector schemes of NPS, has
been stuck on the issue of FDI in pension sector. “There had been a
change in the FEMA guidelines, as a result of which the interpretation
of foreign investment has undergone a change. We have held several
rounds of discussions with the DFS,” he said.
Licences likely by year-end
Contractor said PFRDA was quite hopeful that licences would be awarded by the end of this calendar year.
Indications are that PFRDA will award licences to all the nine entities
that had responded to its request for proposals (RFP) issued in
September last year.
The nine bidders (three public sector and six from private sector) had
bid for a management fee that ranged from 0.07 per cent to 0.1 per cent,
industry sources said. In the RFP, the pension regulator had capped the
investment management fee at 0.1 per cent a year.
This was the first time PFRDA had invited bids for appointment of PFMs,
after its statutory recognition (PFRDA Act, 2013) and the framing of
Pension Fund Regulations in 2015.
Ushering in “differential pricing” is expected to make the pension
sector more “market-driven” and ensure that NPS subscribers can make an
informed choice.
