UTI ASSET Management Company's pension arm, UTI Retirement Solutions has outperformed the two other fund managers, SBI Pension Fund and Life Insurance Corporation Pension Fund in the New Pension Scheme (NPS) for government employees.
According to industry officials, UTI Scheme-I (for central government employees) delivered returns of 12.16% as on December 8, 2009 against SBI and LIC's 11.70% and 11.88%, respectively. These returns are calculated on a mark-to market basis, which involves using the market price of instruments in the portfolio.
Since May 1,2009, the Pension Fund Regulator Development Authority (PFRDA) has asked companies to report all their net asset values (NAVs). Civil servants, who were recruited after 2004, are now part of the NPS — a system aimed at encouraging private fund managers.
According to industry estimates, over 6.5 lakh central and state government employees have now joined the scheme, leading to an accumulation of nearly Rs 3,700 crore in the pension fund corpus.
The contribution from central government employees stood at around Rs 3,550 crore, while those from state governments was a mere Rs 150 crore. However, more state government employees will have to join the NPS for the scheme to function to its full potential, industry players say.
"This performance is because of the strong credit-profile portfolio and better equity stocks selection," says Balram Bhagat, CEO, UTI Retirement Solutions.
Typically, fund managers have the mandate to invest 85% of the funds in debt instruments, while 15% goes to equity.
NPS has not grown as expected because the system doesn't involve advisors to push for these schemes. Besides all these funds are subject to the EET (Exempt-Exempt-Tax) regime, unlike, in the case of PPF (public provident fund) and EPF (Employee Provident Fund) which continue to be under the EEE (Exempt-Exempt-Exempt) tax system.
SBI has the largest share of the Rs 3,700-crore corpus, currently 40%, followed by UTI with 31%, while the balance is with LIC. Under NPS, employees have to contribute 10% of their basic salary and dearness allowance with a matching contribution from their employers.
