Pension regulator PFRDA is planning to further expand the role of fund managers for the New Pension Scheme for the private sector by roping them in as annuity service providers.
This is an option that we are mulling,as we have to gradually set up an annuity service also. Ideally,the fund managers should act as a distribution channel and also provide annuity, Yogesh Agarwal,chairman,Pension Fund Regulatory and Development Authority told The Indian Express.
The move is a part of the PFRDA’s mandate to appoint annuity service providers who would provide a regular monthly pension to subscribers of the New Pension Scheme after retirement.
The NPS for private citizens has seven fund managers including LIC Pension Fund,UTI Retirement Solutions,SBI Pension Funds,IDFC Pension Fund Management Company,ICICI Prudential Pension Funds Management Company,Kotak Mahindra Pension Fund and Reliance Capital Pension Fund.
At present,the fund managers are responsible for only investing the Rs 40 crore corpus of New Pension Scheme for private citizens,although the PFRDA has been keen to give them additional responsibilities.
The recently set up committee under former Sebi chief GN Bajpai has been asked to consider making pension fund managers to market and popularise the NPS,along with the already appointed points of presence. The committee is expected to submit its recommendations next month.
However,most pension fund managers have shown little interest in the proposal on the grounds that the current fee structure does not incentivise them sufficiently to take up the additional responsibility of selling the NPS.
Fund managers earn a fee of 0.009 per cent of the assets under management. With the meagre corpus of the NPS for private citizens,they have little room for profit.
The PFRDA’s proposal to appoint fund managers as annuity service providers may also not pass muster with the insurance regulator IRDA. Annuity products are only sold by insurance companies only. However two of the pension fund managers IDFC and UTI do not have insurance arms.