The Pension Fund Regulatory and Development Authority (PFRDA) on Friday sought applications from entities wishing to float pension funds to manage retirement assets of all Indian citizens, other than government employees already covered under the existing pension scheme.
Indian banks, insurance companies and mutual funds will soon have the opportunity to manage pension funds. The Pension Fund Regulatory and Development Authority (PFRDA) on Friday sought applications from entities wishing to float pension funds to manage retirement assets of all Indian citizens, other than government employees already covered under the existing pension scheme.
Detailed criteria set out by PFRDA in its primary information memorandum (PIM) entitle government institutions, banks, insurance companies and mutual funds to sponsor a pension fund. One important criterion is that the sponsor must have at least five years of experience in running debt and equity funds and should have managed average monthly assets of Rs 8,000 crore for 12 months ended November 30, 2008.
“Insurance companies, being the only manager of long-term finance, are perhaps best suited to manage pension funds. We are very keen to participate in pension fund management,” said Puneet Nanda, chief investment officer, ICICI Prudential Life Insurance. Among private life insurers only a couple of companies, besides ICICI Pru, may be eligible given the requirement of minimum funds under management of Rs 8,000 crore. Among mutual funds, the number would be higher.
Joint ventures are eligible to apply. The selected sponsors shall be required to incorporate the pension fund as a separate company.
The selected sponsors shall be required to incorporate the pension fund as a separate company in which direct or indirect foreign investment should not exceed 26% of the paid-up share capital, according to the information memorandum on the regulator's website. Existing PFs regulated by the PFRDA are also eligible.
The details seem to indicate that the pension regulator has potentially opened the doors to several entities within a group. There are several financial conglomerates with a mutual fund, insurance and banking entity. If these entities meet the eligibility criteria of minimum funds under management and experience, each can apply separately.
Reliance Capital, which owns Reliance Mutual Fund and Reliance Life Insurance, is keen on applying through both companies, said Sam Ghosh, managing director, Reliance Capital. However, given the requirement of minimum funds under management of Rs 8,000 crore, the application is likely to be through the asset management company.
State-owned banks are also interested in the pension fund business. Many state-owned banks also have a mutual fund joint venture. Union Bank of India's chairman MV Nair said the bank is interested in managing pension funds. “A high-level team of the bank would go through the information memorandum issued by PFRDA before taking a decision on whether to apply,” Mr Nair said. The newly-incorporated pension fund management company must have a minimum net worth of Rs 10 crore.
The entry of private fund managers will enable all citizens, even those in the unorganised sector, to invest their retirement funds, however small, in assets of their choice - equity, debt or balanced. They will also have the freedom to shift their portfolio across licensed fund managers.
So far, the PFRDA has licensed pension funds sponsored by the State Bank of India, Life Insurance Corporation and Unit Trust of India to manage funds collected under the new pension scheme for government employees. These three existing pension fund managers will also be eligible to apply to manage retirement funds for individuals other than government employees. The PFRDA runs the new pension scheme which covers those who have joined central services excluding armed forces and some state services since January 1, 2004.
The seeking of expression of interest sets the stage for the second part of pension reforms. In the first stage, three pension funds promoted by SBI, LIC and UTI were given permission to manage the government's new pension scheme. In the second stage, individuals other than government employees will be allowed to invest in PFRDA-regulated funds.
Unlike in the case of mutual fund or insurance, the asset management company will play no role in marketing and distribution of products and will manage only bulk funds allocated to it. Individuals will open accounts through a central registering authority - a job undertaken by NSDL. The PFRDA plans to employ point of purchase outlets and these would include banks, post offices and perhaps insurance companies to distribute its products.
Those keen on applying will have to submit the EOI along with a request for qualification. The RFQ has to include the companies annual report for the past five years and information on corporate profile, reasons for interest in pension funds, and organisation and ownership structure of the sponsor. Once the eligible candidates are short-listed, they will be invited to submit their technical and financial proposals to sponsor a pension fund.
Source: http://www.indiainfoline.com/mf/innernews.asp?storyId=88506&lmn=7
Indian banks, insurance companies and mutual funds will soon have the opportunity to manage pension funds. The Pension Fund Regulatory and Development Authority (PFRDA) on Friday sought applications from entities wishing to float pension funds to manage retirement assets of all Indian citizens, other than government employees already covered under the existing pension scheme.Detailed criteria set out by PFRDA in its primary information memorandum (PIM) entitle government institutions, banks, insurance companies and mutual funds to sponsor a pension fund. One important criterion is that the sponsor must have at least five years of experience in running debt and equity funds and should have managed average monthly assets of Rs 8,000 crore for 12 months ended November 30, 2008.
“Insurance companies, being the only manager of long-term finance, are perhaps best suited to manage pension funds. We are very keen to participate in pension fund management,” said Puneet Nanda, chief investment officer, ICICI Prudential Life Insurance. Among private life insurers only a couple of companies, besides ICICI Pru, may be eligible given the requirement of minimum funds under management of Rs 8,000 crore. Among mutual funds, the number would be higher.
Joint ventures are eligible to apply. The selected sponsors shall be required to incorporate the pension fund as a separate company.
The selected sponsors shall be required to incorporate the pension fund as a separate company in which direct or indirect foreign investment should not exceed 26% of the paid-up share capital, according to the information memorandum on the regulator's website. Existing PFs regulated by the PFRDA are also eligible.
The details seem to indicate that the pension regulator has potentially opened the doors to several entities within a group. There are several financial conglomerates with a mutual fund, insurance and banking entity. If these entities meet the eligibility criteria of minimum funds under management and experience, each can apply separately.
Reliance Capital, which owns Reliance Mutual Fund and Reliance Life Insurance, is keen on applying through both companies, said Sam Ghosh, managing director, Reliance Capital. However, given the requirement of minimum funds under management of Rs 8,000 crore, the application is likely to be through the asset management company.
State-owned banks are also interested in the pension fund business. Many state-owned banks also have a mutual fund joint venture. Union Bank of India's chairman MV Nair said the bank is interested in managing pension funds. “A high-level team of the bank would go through the information memorandum issued by PFRDA before taking a decision on whether to apply,” Mr Nair said. The newly-incorporated pension fund management company must have a minimum net worth of Rs 10 crore.
The entry of private fund managers will enable all citizens, even those in the unorganised sector, to invest their retirement funds, however small, in assets of their choice - equity, debt or balanced. They will also have the freedom to shift their portfolio across licensed fund managers.
So far, the PFRDA has licensed pension funds sponsored by the State Bank of India, Life Insurance Corporation and Unit Trust of India to manage funds collected under the new pension scheme for government employees. These three existing pension fund managers will also be eligible to apply to manage retirement funds for individuals other than government employees. The PFRDA runs the new pension scheme which covers those who have joined central services excluding armed forces and some state services since January 1, 2004.
The seeking of expression of interest sets the stage for the second part of pension reforms. In the first stage, three pension funds promoted by SBI, LIC and UTI were given permission to manage the government's new pension scheme. In the second stage, individuals other than government employees will be allowed to invest in PFRDA-regulated funds.
Unlike in the case of mutual fund or insurance, the asset management company will play no role in marketing and distribution of products and will manage only bulk funds allocated to it. Individuals will open accounts through a central registering authority - a job undertaken by NSDL. The PFRDA plans to employ point of purchase outlets and these would include banks, post offices and perhaps insurance companies to distribute its products.
Those keen on applying will have to submit the EOI along with a request for qualification. The RFQ has to include the companies annual report for the past five years and information on corporate profile, reasons for interest in pension funds, and organisation and ownership structure of the sponsor. Once the eligible candidates are short-listed, they will be invited to submit their technical and financial proposals to sponsor a pension fund.
Source: http://www.indiainfoline.com/mf/innernews.asp?storyId=88506&lmn=7
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