Pension Fund Regulatory and Development Authority (PFRDA) has raised the ceiling on fund management charges to woo more companies in the sector and sustain returns in the long run.
It has already floated requests for proposal (RFPs) for pension fund managers where all the seven existing companies as well as new ones can apply. PFRDA chairman Supratim Bandyopadhyay told Business Standard that there is no cap on the number of fund managers that can come.
Currently the cap on fund management charges is one paise for managing every Rs 100, he said.
He said there would now be four slabs. Cap for assets under management (AUM) between Rs 0-10,000 crore would be nine paise per Rs 100. For over Rs 10,000 crore to Rs 50,000 crore, it would be six paise per Rs 100 and five paise per Rs 100 for over Rs 50,000 crore to Rs 1.5 trillion. Above that, the cap will be three paise per Rs 100, he said.
It will definitely attract more pension fund managers as the new caps would aid the companies invest in human resources as well as IT infrastructure, the two main ingredients in the pension sector, Bandyopadhyay said. The current cap was coming in the way of investing in these two areas, he said.
The RFP says that the sponsor companies of fund managers have to be controlled by at least one of the financial sector regulators -- SEBI, IRDAI, RBI or PFRDA. They will have to be profitable for at least three years out of the last five years and should not run cash losses in any of the years.
RFPs also increased the requirement of average AUMs under sponsor companies to Rs 50,000 crore for the last 12 months against the earlier requirment of Rs 5,000 crore, the PFRDA chairman said, adding that the last RFPs were issued in 2012.
The pension regulator has also raised the minimum capital requirement to Rs 50 crore from earlier Rs 25 crore.
RFPs will be there till January 22. Like in other bids, there will be technical and commercial bids. Once companies qualify the technical bids, their commercial bids will be assessed.
The PFRDA chairman feels that the existing companies, if they qualify, would start functioning from the beginning of the next financial year, while it would take another five-six months for new ones to start their operations in the pension sector.
The new pension system (NPS) had Rs 549,000 crore as AUM as on December 31, 2020, which was up 31.6 per cent from March end 2020. Equity has given a rate of return at the compounded annual growth rate of 10.75 per cent as on December end, corporate bonds 10.56 per cent and government bond 10.19 per cent. End
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