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Rediff News  All News  » Business » PF regulator mulls handling corporate pension funds

PF regulator mulls handling corporate pension funds

September 23, 2009 02:54 IST
The Pension Fund Regulatory and Development Authority will consider a proposal to manage the pension funds of companies at its board meeting on Wednesday, extending its role from being manager of individual pension plans.

The issue has been raised after PFRDA received proposals from the State Bank of India, the country's largest lender, and the Himachal Road Transport Corporation to manage their employees' pension funds.

These companies and the PFRDA will, however, have to sort out certain issues before the idea takes off. Currently, for instance, records for individual retirement plans under the new pension system are maintained by the central record-keeping agency, National Securities Depository Ltd. To keep costs low, SBI and HRTC want to avail of the facilities of the fund manager only and not of the record-keeping agency.

"They want to keep record-keeping with themselves because they have been doing so for sometime. We are saying you must take the full architecture and not only one aspect of it. We are going before the PFRDA board tomorrow to take a view on it," PFRDA chairman D Swarup told Business Standard on Tuesday.

The fund management charge comes to 0.0009 per cent of the assets under accumulation, which is less than one paisa per Rs 100 against the Rs 350 annual fee that NSDL charges for individual subscribers. The companies also want flexibility to negotiate charges with the fund manager.

In August 2008, the government had decided to offer the NPS to all citizens on a voluntary basis. The fund managers appointed by the PFRDA are SBI, UTI Asset Management, ICICI Prudential Life Insurance, Reliance Mutual Fund, IDFC Mutual Fund and Kotak Mahindra Mutual Fund.

Wednesday's board meeting will also decide on the framework for the withdrawable Tier-II account of the NPS that is slated for launch on December 1. For Tier-II accounts, investors must have an active Tier-I account. The same investment pattern that is applicable to Tier-I will also be applicable to Tier-II account holders. Tier I accounts, which were launched in May, do not permit withdrawal while Tier- II works like a savings account with flexibility to withdraw at any time.

"We have decided all the features of Tier-II accounts. There is total flexibility in terms of how much you want to invest and when you want to invest and withdraw. We do not want to put any cap on the amount deposited or withdrawn. There will be no additional administration cost. But there is a transaction cost to be paid to the point of presence and the record-keeping agency," Swarup said.

The meeting to finalise the recommendations of the Swarup committee on investor awareness and protection is also scheduled for Wednesday.

"We are going to place before the committee the views from the consultation paper. The committee will take a view on whether we need to moderate the draft recommendations. Final recommendations should hopefully be ready before the end of the month," Swarup added.

Vrishti Beniwal in New Delhi