PFRDA to finalise guaranteed plan with minimum return by Fy21-end

The pension fund regulator will finalise a guaranteed product, which will assure minimum return by the end of this fiscal year. Besides, it is likely to raise the cap on the fee for pension fund managers from 1 basis point (bps) of assets under management (AUM).

“This fiscal year, we will formulate a product. We will give it to the board for approval and then launch it,”

Pension Fund Regulatory and

Development Authority

(PFRDA) Chairman Supratim Bandyopadhyay told reporters through a virtual press conference.

He said the assured minimum schemes in the insurance and mutual fund (MF) sectors have not done very well. “Whatever guaranteed products were there in the insurance sector were withdrawn because it was felt that giving guarantee for long periods may not be in the interests of the organisation.

The Securities and Exchange

Board of India does not encourage any guaranteed product,” he said. However, it will be introduced since it is part of the PFRDA Act.

“The moment you give guarantee and the markets move down, fund managers will have to bring in additional capital. So, actuarial inputs are necessary. Not only capital requirements, there are going to be different charge structures. There has to be a separate guarantee fee,” the regulator said.

On increasing the cap on fee for pension fund managers, Bandhyopadhyay said, “Our board has approved the formation of a committee to recommend a cap on fees. We are expecting a report sometime next week. By the second or third week of November, the board will approve these rates.” After that, PFRDA will issue requests for proposals for new fund managers by early December.

Bandyopadhyay said PFRDA need not give actuarial evaluation of National Pension System (NPS) as was pointed out by the Comptroller and Auditor General of India. Once this product is launched, then evaluation would become necessary. For Atal Pension Yojana, actuarial valuation is being given.