The Pension Fund Regulatory and Development Authority (PFRDA) will soon undertake a relook at the remuneration structure of pension fund managers (PFMs) and bring improvements to enhance the number of players in the Indian pension market, according to the pension regulator’s newly appointed Chairman, Supratim Bandyopadhyay.
It plans toissue a Request for proposal (RFP) in the next few months to onboard PFMs with enhanced remuneration structures into the system. “We are waiting for some clarifications (around computation of foreign investments) from the Finance Ministry. Hopefully, it will come this month. We plan to issue new RFPs with new revenue structure in the next 2 to 3 months,” Bandyopadhyay told
Asked if there is a perception that PFMs are underpaid because of the regulatory cap on fees, Bandyopadhyay said this is not a perception but a reality. “We have made a study on the different sectors. Just 1 basis point as fee for fund management nobody charges. So, we need to revise the remuneration structure for PFMs to encourage more players to come into the pension market,” he said.
To bring in reforms
Bandyopadhyay, who has more than three decades of experience (mainly in LIC) in the pension space, plans to usher in several reforms in the pension market to expand its size in the coming years.
Currently, there are more than one crore NPS subscribers, with a total corpus at about ₹4.08-lakh crore. He has set his sights on expanding the bouquet of offering from the PFRDA beyond National Pension System (NPS) and Atal Pension Yojana (APY).
“We will be looking at introducing newer products such as those with minimum guarantees; also, some form of payout products on the lines of annuities. The upcoming Bill to amend the PFRDA law will help us roll out newer products. Today, people understand PFRDA only by NPS. We want to have more variants that will attract subscribers and savers,” he said.
Bandyopadhyay said that the Bill to implement the Budget announcement to amend the PFRDA Act for separation of NPS Trust for government employees from PFRDA is likely to be introduced in the ongoing second leg of Budget session.
PFRDA Act
It may be recalled that the PFRDAAct was passed in September 2013 and had come into effect from February 2014.
Going forward, once the PFRDA Act gets amended, the pension regulator will also get oversight powers on Approved Superannuation Funds and certain other pension schemes that hitherto remain unregulated, he said.
On the lines of insurance sector, where the regulator IRDAI has separate product approval framework, the PFRDA is also toying with the idea of setting up a product-approval department, said Bandyopadhyay.
On West Bengal, which is yet to join the NPS, Bandyopadhyay said that efforts will be taken to convince the State to come on board the NPS bandwagon. “Continuing with defined benefit programmes will at one time or the other bring huge financial strain for the exchequer. This has to be realised by the State. Most States have understood this and moved to NPS,” he said.
The NPS Trust will also take efforts in the coming days to improve awareness of pensions. Bandyopadhyay also said that PFRDA will look to go deep into top corporates (about 7,000) and nudge their employees to get into NPS.
The PFRDA Chairman pointed out that the pension markets are bigger worldover than that of mutual funds, which is not the case for India. “There is now a big need to push pension products in the country and grow this market. We will also look at bringing some ad campaigns for this purpose,” he said.