The Pension Fund Regulatory and Development Authority (PFRDA) is likely to increase the management fee payable to pension fund managers (PFMs). This to incentivise them to market the national pension system (NPS).
Currently, PFMs get a paltry 0.0009 per cent per annum as fund management fees.
“The 0.0009 per cent fees that fund managers get is an insult. It needs to be revised,'' said Mr Yogesh Agarwal, Chairman, PFRDA, after inaugurating Union Bank of India's facility to handle NPS.
The 3,000-odd branches of the public sector bank will act as point of presence service provider (POP-SP) to facilitate opening of NPS accounts, receive contribution and offer services such as switching between various investment options.
The PFRDA has authorised seven PFMs to manage the national pension system. The scheme was earlier called the new pension system. Between them, the PFMs manage a corpus of Rs 9,000 crore.
LIC Pension Fund Ltd, SBI Pension Funds Pvt Ltd, and UTI Retirement Solutions Ltd manage the pension funds of government employees who joined service after January 1, 2004.
IDFC Pension Fund Management Co Ltd, ICICI Prudential Pension Fund Management Co Ltd, Kotak Mahindra Pension Fund Ltd and Reliance Capital Pension Fund Ltd manage the pension funds of all citizens.
The NPS is a voluntary saving scheme based on defined contributions. It seeks to provide old age income and reasonable market based returns to all citizens.
In the case of Government employees, the monthly contribution to the NPS is equivalent to 10 per cent of their salary and dearness allowance. This contribution is matched by the Union Government.
However, there is no contribution from the Government in respect of individuals who are not Government employees.
The minimum contributions are Rs 500 a transaction and Rs 6,000 a year in the case of all citizens.