Wednesday, April 15, 2015

NPS: Govt employees may get to choose their fund managers


Pension regulator PFRDA may allow Central and state government employees the flexibility to choose their own fund managers for managing their corpus in the National Pension System (NPS).

Such a move will bring these government employees on a par with the private individual subscribers, who already enjoy the facility to choose their fund managers.

"The plan to provide choice to government employees for deciding their fund managers is consistent with the design of the NPS architecture as a subscriber-centric model," R.V. Verma, PFRDA Member, told BusinessLine.

As on date, over 70 per cent of the NPS corpus of ₹82,000 crore comprises contributions from Central and State government employees.

Currently, it is the Centre or the state government that chooses the fund manager for the NPS contributions.

Empowering the subscriber to choose the fund manager will allow these government employees the option to take risk and maximise pension, according to Verma.

The facility of switching from one fund manager to another is also proposed to be provided, he said, adding that this will ensure that pension fund managers do not become complacent.

Verma also said the plan to provide choice to government employees is also in line with the Bajpai panel’s recommendations to widen the choice for NPS subscribers — whether it be in the case of fund managers or the basket of instruments in which funds can be parked.

"The existing system (of government deciding the fund managers) will continue. We are only going to add choice to the government employees who are NPS subscribers," Verma said.

In 2004, the Centre moved away from the defined benefit pension system to a defined contribution pension system.

All new entrants into Government service after January 1, 2004, had to mandatorily go in for the defined contribution pension system.

Currently, the Centre and 27 States have adopted NPS. The private sector corpus in NPS is only around ₹5,000 crore.