The government is likely to provide more clarity on foreign direct investment (FDI) in the pension fund sector in the next 8-10 days, enabling the regulator Pension Fund Regulatory and Development Authority (PFRDA) to bring in more players as pension fund manager (PFM) to manage the assets under the National Pension System (NPS).
The pension fund regulator has been unable to appoint fund managers as the government informed the PFRDA to halt the process till the government takes a view on the FDI status.
“The government informed us that it will give clarity on FDI status within 8-10 days. We will appoint fund managers once the government gives the clarification,” PFRDA Chairman Hemant Contractor told The Indian Express.
“We have eight fund managers to manage the funds under NPS. We want to bring in more managers,’ Contractor said. “The overall FDI limit in pension fund managers will 49 per cent… which is similar to the insurance sector. The government has to clarify how this 49 per cent will be calculated. How much will be direct investment, FII investment etc.,” he said.
More than 5.36 lakh subscribers have joined NPS under NPS-all citizen model. The overall number of NPS and APY subscribers has crossed 1.80 crore with total assets under management (AUM) of more than Rs 220,000 crore.
The new computation process will also have an impact on the existing fund managers. HDFC Pension Management Co, ICICI Prudential Pension Fund Management Company, Kotak Mahindra Pension Fund, LIC Pension Fund, Reliance Capital Pension Fund, SBI Pension Funds, UTI Retirement Solutions and Birla Sunlife Insurance Company. PFRDA had recently revamped the selection process for fund managers, but the whole exercise was scrapped due to the FDI clarification issue.
Under the NPS, individual savings are pooled into a pension fund which are invested by PFRDA regulated professional fund managers as per the approved investment guidelines in to the diversified portfolios comprising of government bonds, bills, corporate debentures and shares. These contributions would grow and accumulate over the years, depending on the returns earned on the investment made. At the time of normal exit from NPS, the subscribers may use the accumulated pension wealth under the scheme to purchase a life annuity from a PFRDA empanelled life insurance company apart from withdrawing a part of the accumulated pension wealth as lump-sum, if they choose so.
Funds are managed by professional fund managers from the public and private sectors with proven track record and as per the PFRDA approved investment guidelines. At present there are 8 pension fund managers managing the pension wealth of subscribers.
Recently, PFRDA had increased the maximum age of joining NPS from 60 to 65 years — i.e. subscribers in the age group of 18-65 years can join NPS now. Subscribers can open their NPS account — through POPs (points of presence) — with a minimum subscription of Rs 500. NPS account can also be opened through eNPS platform.