Monday, May 10, 2010

NPS Updates

Pension Fund Regulatory & Development Authority (PFRDA), the pension fund regulatory body, is planning a massive marketing campaign to revive the New Pension System (NPS) for the unorganisedsector.TheCentre had recently announced the appointment of Yo gesh AgarwalasPFRDAchairman.

A committee has already finalised the details of the Rs 10 crore marketing campaign and it would be launched after the new chairman approves it, PFRDA sources said. A PFRDA team is also meeting private corporates to facilitate their pension funds to be channelised through the PFRDA selected pension fund managers.

While the NPS was supposed to tap massive 80% of the unorganised working population, who don't have the access to any kind of pensions,six fund managers-SBI Pension Funds,UTI Retirement Solutions,I CICI Prudential Pension Funds Management Company, Kotak Mahindra Pension Fund, IDFC Pension Fund Management Company, Reliance Capital Pension Fund---have mobilised just Rs 10 crore from 5,000 accountsinlastoneyear.

UTI Retirement Solutions CEO Balram Bhagat said, "With the response in the last one year, we can certainly say that the NPS has not taken off rightly .

There has been no investor awareness to promote the NPS whichisalsoonereasonthatthe scheme is way below the expectations."Headded,thereshould beaseparatecommittee formed to look into the failure of the scheme.Alsofinancialintermediaries should be roped in to sell NPS. The way the NPS system is works currently only Central Recordkeeping Agency (CRA) owned by National Securities Depository Ltd (NSDL) is benefitingasitreceivesRs500-600per accounttomaintainthem.

"The government and the pension regulator will have to spend generously to popularise and raise awareness about pension schemes,'' said LIC PensionFundsCEOHSadhak.

It was expected that low fund management charges,Rs 9 for Rs 10 lakh each, would make more money available for investments and will be an incentive for the NPS investors,butithasnotproduced thedesiredeffects.

Rather the 21 life insurers, which have pension products on both unit linked and traditional platforms and were expecting competition from new pension fundmanagers,havebeenableto mobilise substantial amount of premium by selling these products in 2009-10. The state-owned Life Insurance Corporation (LIC) has mopped up around Rs 7,500 crore from one of its pension product Market Plus.

Even the three pension fund managers—SBI Pension Funds Private ,UTI Retirement Solutions, LIC Pension Fund—which are currently managing the Rs 4000 crore of pension funds of government of India are finding tough to manage their expenses as the fund management charges are low. “Going by the existing system of operations,it would be long way to reach profitability in this way where our current income is much less thantheexpenses,”saidSadhak.

Fund managers feel that marketing, portability (investors can change fund manager at no cost), a wide choice available in selecting where the money is invested and transparency should help in the product finding favour in due course.According to a Ficci-KPMG study, the reform of the pension system in India wouldhelpincreasethemarket size to Rs 4,06,400 crore by 2025 from Rs 56,100 crore estimated in 2002. Tthe overall economic gains would be substantial as the mobilisation of assets would lead to effective investments in the stock, bond and mortgage markets,t hereby supplying capital to finance corporate growth and government,saidthereport.

Posted via email from Ranjan's posterous

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