BANKS, insurance companies and mutual funds will soon have the opportunity to manage pension funds. The Pension Fund Regulatory & Development Authority (PFRDA) sought applications from entities wishing to float pension funds to manage retirement assets of all Indian citizens, other than government employees already covered under the pension scheme.
The criteria set out by PFRDA entitles government institutions, banks, insurance companies and mutual funds to sponsor a pension fund. One important condition is that the sponsor must have at least five years’ experience in running debt and equity funds and should have managed average monthly assets of Rs 8,000 crore for 12 months ending November 30, 2008.
Insurance companies, being the only manager of long-term finance, are perhaps best suited to manage pension funds. We are very keen to participate in pension fund management. Among private life insurers only a couple of companies besides ICICI Prudential may be eligible. The number would be higher among mutual funds.
Joint ventures can also apply to handle pension funds. The selected sponsors shall be required to incorporate the pension fund as a separate company in which direct or indirect foreign investment should not exceed 26% of the paid-up share capital, according to the information memorandum on the regulator’s website. Existing PFs regulated by PFRDA are also eligible to apply.
Who can run the fund?
- Govt institutions, banks, insurance cos & Mutual Funds
- Doors now open to several entities within a group
- Existing PFs regulated by PFRDA
What are the eligibility criteria?
- At least 5 yrs’ experience in running debt & equity funds
- Should have managed average monthly assets of Rs 8,000 cr for 12 months ended Nov 30, 2008
How does it help you?
Private fund management will help you invest your retirement funds in assets of your choice You can also shift your portfolio across fund managers
Pension fund co net worth should be Rs 10 cr
The newly-incorporated pension fund management company must have a minimum net worth of Rs 10 crore. The entry of private fund managers will enable even workers in the unorganised sector to invest their retirement funds, however small, in assets of their choice (equity, debt or balanced).
They will also have the freedom to shift their portfolio across licensed fund managers.
So far, PFRDA has licensed pension funds sponsored by State Bank of India, Life Insurance Corporation and Unit Trust of India to manage funds collected under the new pension scheme for government employees.
