Existing eight managing non-govt money to reapply

All the eight pension funds managing private sector workers’ money in the National Pension System (NPS) will be applying for re-selection. Bids for a five-year appointment to manage private sector pensions have been invited by the Pension Fund Regulatory and Development Authority (PFRDA).

The eight funds met PFRDA officials on Wednesday to clarify various conditions in the formal Request for Proposal (RFP) floated by the Authority. The final date for technical bids is February 14; it is February 28 for commercial bids; these are separate applications. The letter of intent will be given to those selected on March 4.

Three of the eight funds mentioned — LIC Pension Fund, SBI Pension Funds and UTI Retirement Solutions — are also managing the pension corpus of present and former government employees (they are the only three to be doing so). The RFP conditions exempt these three from having to give technical bids; they’d met the required conditions in 2012. They will have to give commercial bids. The other five, which manage only the private sector’s money, will have to give both. These being HDFC Pension Management Co, ICICI Prudential Pension Funds Management Co, Kotak Mahindra Pension Fund, Reliance Capital Pension Fund and DSP BlackRock Pension Fund Managers.

In addition, applications have been invited from other funds, too. Criteria have specified for minimum eligibility. And, PFRDA has said, it might appoint any number for this next five-year term — eight, less than or more than this many.

NPS is the contributory pension scheme launched by the Union government in January 2004. It was made compulsory for all new government employees. Those in all non-government livelihoods, including those not in any organised sector, were invited to join from 2009. PFRDA  enforces the rules; it got statutory status a few months earlier.

PFRDA has said a sponsor, to be eligible for applying, must be in a registered financial services business, monitored by it or the Reserve Bank or Securities and Exchange Board of India or the insurance regulatory body. It must have a positive net worth (meaning, a profit) and be engaged in financial business for the preceding five years.

Companies have raised some concerns on these criteria. For instance, that it is difficult for expect companies to generate a profit within five years. Also, the sponsor(s) of a pension fund must have at least three years experience of fund management in both equity and debt securities. And, the average of assets under management must not be less than Rs 8,000 crore for the 12 months ending the preceding month of application.

These are some other norms, too. “While these are strict, funds already operating in this space should not find it difficult to re-bid under the new norms,” said the chief of a private sector NPS fund manager.

Under the NPS, you can regularly invest your money into your pension account and have an option of taking a part of the corpus as a lump sum amount and the balance as a fixed monthly income. To invest in NPS, it is mandatory for an individual to open a Tier-I account, where withdrawal is not allowed.

However, after opening this, you can also start a Tier-II account, where partial withdrawal is allowed. Up to 20 per cent of the money can be withdrawn from NPS before one turns 60; the rest has to be used to buy an annuity.