Pension regulator to seek bids from PSBs for new scheme

The Pension Fund Regulatory and Development Authority (PFRDA) will be inviting tenders from public sector banks to act as a custodian bank for its New Pension Scheme (NPS), within the next two weeks. According to PFRDA chairman D Swarup, the decision on the custodian bank will be taken before the end of this financial year.

PFRDA has recently announced State Bank of India, UTI Asset Management Company and LIC as the fund managers for NPS. “The three fund managers have incorporated new companies and are expected to start work by March 31, 2008,” said Mr Swarup.

The authority had also appointed NSDL as the central record-keeping agency, which will be fully functional by May 31, 2008. According to Mr Swarup, close to Rs 2,500 crore has been accumulated under contributions towards NPS for central and state government employees of 19 states that have adopted it, and these funds will be transferred to the fund managers by the beginning of next financial year. Three states — West Bengal, Kerala and Tripura — have not opted for NPS.

NPS will provide seamless portability across jobs and locations, unlike all current pension plans, and will allow various investment options for the investor. However, all this will be possible only after PFRDA is given statutory power, after the PFRDA Bill, which has been pending in parliament for four years now, is passed. Mr Swarup, on his part, is confident that the bill will be passed by the end of Budget session.

Under current guidelines, only up to 15% of the fund can be invested in equities. The rest has to be invested in fixed-income instrument like government bonds. However, the regulator proposes to raise this limit to 50% after the bill is passed, and hopes to raise this to 70% as the sector gains maturity.

Mr Swarup also mentioned the regulator might allow fund managers to invest in corporate bonds, once the bill is passed. Speaking at a seminar organised by the Bombay Chamber of Commerce and Industry, Mr Swarup underscored the importance of speedy implementation of pension sector reforms. India is perhaps the youngest country in the world. It is also ageing fast and the population of people above 60 years of age, which is 80 million today, will double in the next 18 years.

Further, the annual pension bill for the central and state governments stands at Rs 65,000 crore currently. With this growing at the rate of over 20% per year, the burden on government finances will become unsustainable, feels Mr Swarup.


Source: http://economictimes.indiatimes.com/Personal_Finance/Savings_Centre/Pension_regulator_to_seek_bids_from_PSBs_for_new_scheme_in_2_weeks/articleshow/2716472.cms

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