PFRDA tries to resurrect the NPS; will review fund managers’ performance

The Pension Fund Regulatory and Development Authority is trying to revive the New Pension System starting with a review of fund managers.

The Pension Fund Regulatory and Development Authority (PFRDA) will hold a meeting with fund managers of the New Pension System (NPS) on 17th May to review their performance, a senior official of PFRDA has told Moneylife.

"We are going to have a meeting with the fund managers to review their performance. They are supposed to give us presentations on 17th May," said Kamal Kumar Chaudhry, chief general manager, PFRDA.

The NPS was introduced on 1st January 2004 and it is available to all citizens on a voluntary basis and is mandatory for Central government employees (except armed forces personnel) appointed on or after 1 January 2004.

Six fund managers-LIC Pension Fund Ltd, SBI Pension Funds Pvt Ltd, IDFC Pension Fund Management Co Ltd, ICICI Prudential Pension Funds Management Co Ltd, Kotak Mahindra Pension Fund Ltd and Reliance Capital Pension Fund Ltd manage funds and subscribers are free to choose any one of these managers.

Though NPS has immense potential for retirees, especially those who do not manage a steady source of income after retirement, there has been a tepid response to the scheme.

Moneylife has been constantly pointing out that there are a number of lacunae in the way the government is handling the scheme. (Please scroll down for more on this issue).

The lukewarm response for this scheme-right since its inception-is thanks to the lack of interest from service providers in selling the scheme and stringent restrictions for withdrawal. There is also no authentic data or mechanism to access the historical performance of the NPS fund managers for common citizens.

PFRDA, which acts a regulator for the pension sector and is supposed to maintain transparency in this field, is not updated with the past performance of the fund managers.

An investor can only access the previous day's net asset value (NAV) of any scheme under the NPS on the Central Recordkeeping Agency's (CRA) website. A few fund managers also publish the previous day's NAV as well as historical NAV, but there is no way to get a comparative view of all the funds so that a comparison can be done.

"As far as yearly performance is concerned, we have received details from the fund managers and our consultants are working on that. After the meeting, we will publish all information on our website in the same week," said Mr Chaudhry.

Even CRA, which bears the responsibilities of recordkeeping, administration and customer service functions for all subscribers of the NPS, does not maintain the historical performance of the fund managers.

"We cannot provide you any information regarding the fund managers' performance. For the desired information you can contact the PFRDA," an executive from CRA told Moneylife.

Under the NPS guidelines, fund managers are allowed to invest in the specific class mentioned by subscribers and the proportion of the investment is also defined by the PFRDA for every class. There has been very narrow room for the fund managers to play with their corpus.

Practically, there should not be much of a difference in returns. However, it has been observed that fund mangers sit on a large portion of cash that leads to losses in returns.

According to a media report, the performance of NPS fund managers was varied during calendar year 2010. In the Tier-1 category, Reliance was the top fund manager for the 'E' class. Reliance gave 24.66% return in the 'E' class, while SBI (which generated 16.47% return) and UTI (15.66% return) took second and third place in the same class. In the 'C' class, SBI gave 13.30% return and UTI's return was 8.83%. In the 'G' class, there was a huge difference between SBI and Reliance's returns as SBI managed 10.36% return, whereas Reliance gave only 7.06%.

These figures clearly indicate that much needs to be done to get the fund managers live to the letter and spirit of NPS.

You may also want to read:

  •   Pension regulator's incentive to funds to make New Pension System work  will fall flat, say experts

  •   Will Yogesh Agarwal create a moral hazard for the New Pension Scheme?

  •    Another turf war: PFRDA wants pension fund managers to provide annuity, not insurers

  •   Govt introduces Bill to give statutory power to PFRDA




5 years ago

The information about historical NAVs not being available on the CRA website is incorrect. I am a subscriber to NPS and can access historical NAVs.

High-value corporate M&As will require CCI sanction from 1st June

Companies with a turnover of more than Rs1,500 crore will require to seek the approval of the Competition Commission before merging with another firm; rules come into effect on 1st June

New Delhi: The Competition Commission today notified regulations requiring corporates to seek its approval before going in for high-value mergers and acquisitions.

According to the notification, the CCI will take a view on the proposed merger deals within 180 days of the filing of the notice by the companies.

The regulation, titled “Competition Commission of India (procedure in regard to the transaction of business relating to combinations) Regulations, 2011,” will come into force from 1 June 2011, the competition watchdog said. The parties would have to submit a fee of up to Rs1 lakh along with the application seeking the CCI’s approval, reports PTI.

“The CCI Act empowers the Commission to regulate combinations which have caused, or are likely to cause appreciable adverse effect on competition,” the Commission stated. Under the regulations, the Commission can approve the merger proposal, reject it, or modify it.

The regulations follow the notification in March of Section 5 and 6 of the Competition Commission Act, 2002, which deals with mergers and acquisitions (M&As).

According to the provisions in the Act, companies with a turnover of over Rs1,500 crore will have to approach the CCI for approval before merging with another firm. Only those proposals would need the CCI's nod where the companies have combined assets of Rs1,000 crore or more, or a combined turnover of Rs3,000 crore or more, as per the Act. Also, the target company’s net assets have to be a minimum of Rs200 crore or it should have a turnover of Rs600 crore for intervention by the CCI.

The CCI held wide consultations with industry bodies and law experts to work out the regulations.

The Commission was fully functional in 2009, with the appointment of a chairman and six members. Under the current process, it is empowered to check anti-competitive agreements and abuse of dominant position, drawn from Sections 3 and 4 of the Competition Act, 2002.


Cairn Energy may have to again extend deadline for stake sale to Vedanta

It is unlikely that the group of ministers will meet and resolve the matter before the current deadline of 20th May

New Delhi: Edinburgh-based Cairn Energy Plc may have to again extend the deadline to conclude the sale of 40% stake in its Indian unit to Vedanta Resources, as a ministerial panel vetting the deal is unlikely to meet before next week.

Cairn Energy Plc chief executive Bill Gammell today met oil minister S Jaipal Reddy to put forward the urgency for a decision before the 20th May deadline which his company and Vedanta have set to conclude the $9.6 billion deal.

Mr Gammell, who could not get an audience with the minister yesterday, expressed deep concern on the likelihood of missing the deadline, an official who is privy to the deliberations said, reports PTI.

Mr Reddy, on his part, expressed helplessness, as it is finance minister Pranab Mukherjee who has to convene the meeting of the group of ministers (GoM) on the matter. He also said that the deadline was an internal understanding between Cairn and Vedanta and had nothing to do with the government.

Cairn Energy spokesperson David Nisbet could not be reached for comments immediately.

“There is no indication of the GoM meeting being held this week. The finance minister’s office has inquired about the availability between May 17 and 19 and it is very unlikely that the meeting will take place before that,” the source said.

It is also unclear whether the GoM will require more than one meeting to vet the proposal, after which it will have to go back to the Cabinet Committee on Economic Affairs (CCEA), which is the final authority in this case.

Cairn, which had previously set 15th April as the deadline to conclude the sale, had raised a hue and cry over the sanctity of the deadline, saying this could not be extended. But a day after the CCEA referred the deal to the GoM on 6th April, the deadline was put off to 20th May.

The source said that Mr Gammell, who also met law minister M Veerapa Moily, again underlined the issue of the 20th May deadline.

The GoM consists of Mr Mukherjee, Mr Reddy, Mr Moily as well as Planning Commission deputy chairman Montek Singh Ahluwalia and telecom minister Kapil Sibal, and it is split down the middle over the approval for the deal.

The law ministry and the Planning Commission have backed Mr Reddy’s option to give clearance to Vedanta only if it agrees to ONGC being allowed to recover the Rs18,000 crore that the state-owned explorer is liable to receive in royalty from Cairn India in the all-important Rajasthan oilfields. However, the finance ministry is in favour of Mr Reddy’s second option of granting consent without any pre-condition and taking appropriate decisions to protect ONGC’s interests.


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