New Delhi: Seven public sector banks, insurance companies and asset managers have bid for managing the pension funds of government staff under a new system, where the employee and employer are required to make a matching contribution.
Punjab National Bank, State Bank of India, UTI Asset Management, Canara Bank, IDBI Capital, LIC and Securities Trading Corporation of India submitted bids for managing the pension funds.
“By next week, we will select the eligible pension fund managers and then assess them on the basis of Request for Qualifications,” Pension Fund Regulatory and Development Authority (PFRDA) executive director, Meena Chaturvedi, said.
She said interim regulator PFRDA would finalise 2-3 pension fund managers by mid-July.
Only financial service providers in which government has at least 51% share and manage assets worth Rs10,000 crore are eligible to apply in the expressions of interest. Friday, 25 May 2007, was the last date for submitting preliminary bids.
This is an interim mechanism till the pension reforms bill, opposed vehemently by the UPA’s Left allies, is passed by Parliament.
“This is a big leap ahead,” PFRDA chairman D Swarup said, commenting on the bids for managing pension funds whose size is estimated at over Rs1,600 crore.
By June 11, PFRDA will issue Request for Proposal (RFP) under which financial institutions would be required to give requisite financial details and be given 2-3 weeks to submit the RFP. The process would be completed by July 20.
Once the fund managers are appointed, PFRDA will allow them access to the pension funds of employees of the Central government and some state governments.
PFRDA has appointed National Securities Depository NSDL) as central record keeping agency.
NSDL is in the process of preparing a software, database and network connectivity to manage all funds under the NPS.
Under the NPS, implemented for all the Central government employees except armed forces recruited since 2004, employees have to contribute 10% of their basic salary and dearness allowance, along with a matching contribution of their employer.
This contributory system is in contrast to the earlier system, in which employees used to get defined returns.
The fund manager will offer alternative products to employees including risk-free options under which all funds would be invested in government securities, and share-market linked products with variable returns as well.
All states, except three left-ruled states of West Bengal, Tripura, Kerala and some Northeast states have switched over to the new pension system. North-east states are willing to shift to the NPS once the framework of fund managers are ready.
As per the latest figures, about five lakh employees have joined NPS and the fund is grown to approximately Rs1,600-1,700 crore.