PFRDA mulls up to 10-time hike in commission for fund managers

Pension fund regulator PFRDA is planning to increase the commission for pension fund managers by 10 times to 0.1 per cent from the present 0.01 per cent, a top official said today.
The Pension Fund Regulatory and Development Authority (PFRDA), however, will cap the proposed increase at 0.1 per cent and wants the pension fund managers to decide what rate to be charged from investors.
"We are likely to come up with a notification by the month-end in which we are planning to increase the commission to be charged by the pension fund managers to 10 basis points or 0.1 per cent from the 0.01 per cent," PFRDA chairman Hemant Contractor told PTI on the sidelines of an FPSB event here.

"But we want to put a cap of 0.1 per cent and within that cap the fund managers will be free to fix their commission as part of differential structure mode," he said.
Currently, there are seven PFMs which include three state-owned players like LIC, SBI and UTI.
Outlining the benefits of a differential fee structure, PFRDA whole-time member (finance) RV Verma said "it will induce greater competition, efficiency and benefits will accrue to the subscribers and the system as well." This will result in greater stability among the pension fund industry compared to a broad-based approach and one-size-fit-all kind of approach, he said.

A movement away from a uniform structure to a differential fee structure will be more realistic vis-a-vis the business and revenue model of differently sized PFMs, Verma said, adding "they will take into account their own cost structure including staffing, infrastructure, IT framework and their own internal capabilities."

According to Contractor, 9-10 new PFMs may join the bandwagon of already existing seven players shortly. "We hope that 9-10 new PFMs may join the space of pension fund management shortly and we will come up a notification in this connection by the month-end," he said.
On the size of National Pension System, he said its AUM has already crossed the Rs 1.43 trillion mark and it is likely to touch Rs 1.55 trillion by the end of the current fiscal year.

On the Atal Pension Yojana, Contractor said "we have already opened 38 lakh accounts under this so far and we hope that it may go upto 50 lakh by March."
The regulator is working on amending the existing regulation on pension funds to make them more attractive. "We are working on amending the existing regulations. Like on exit, we want to make some changes. If one wants to withdraw then we want to reduce the time-limit to three years from the currently existing mark of 10 years," he said.
"We want to make pension fund more attractive and hence the amendment, he added. He maintained that the ongoing demonetisation move by the government will not have any impact on the pension fund industry.