Empanelment of Annuity Service Providers (ASPs) for National Pension System (NPS)

Empanelment of Annuity Service Providers (ASPs) for National Pension System (NPS) for providing annuity services to the subscribers of National Pension System

Subscribers to the National Pension System (NPS) will now have a choice of Annuity Service Providers, from whom they can choose their annuity schemes on their exit from NPS on attainment of 60 years of age.    Pension Fund Regulatory and Development Authority (PFRDA) has empaneled  the following  six IRDA approved life insurance companies  for providing annuity services to the subscribers of National Pension System (NPS). 

SUBSCRIBERS TO NPS TO NOW HAVE CHOICE OF ANNUITY SERVICE

PFRDA takes Important Step towards Providing an Exit Route to theSubscribers
Subscribers to the National Pension System (NPS) will now have a choice of Annuity Service Providers, from whom they can choose their annuity schemes ontheir exit from NPS on attainment of 60 years of age. Pension Fund Regulatory and Development Authority (PFRDA) has empanelled the following six IRDA approved life insurance companies for providing annuity services to the subscribers of National Pension System (NPS).

1. Life Insurance Corporation of India
2. SBI Life Insurance Co. Ltd.
3. ICICI Prudential Life Insurance Co. Ltd.

Management of Funds under NPS

The investment of pension funds of Government employees, who are covered as subscribers to the New Pension System (NPS), was hitherto being made through a pooling arrangement whereby the funds of such employees were credited to a pool account (pending reconciliation of subscribers’ contribution details) from which such funds were allocated to pension fund managers for immediate investment in the best interest of the subscribers. These funds of the Government employees are being managed based on the investment Pattern prescribed by the Government.

The pension funds of the Government employees, who are covered by NPS, are managed by three pension fund managers, namely, SBI Pension Funds (Pvt.) Limited, UTI Retirement Solutions Limited and LIC Pension Fund Limited.

PFRDA CALLS FOR FUND MANAGERS TO LOOK AFTER CENTRAL GOVERNMENT EMPLOYEES (NPS)

 Pension fund regulator PFRDA has invited bids from financial institutions to manage funds of Central Government Employees under the New Pension Scheme (NPS) for the next three years beginning April 1, 2012.

            The fund managers will be required to manage the pension assets of Central government employees, according to Pension Fund Regulatory and Development Authority (PFRDA).

            The three pension fund managers will have to submit bids by March 15, PFRDA said. At present, pension funds of government employees are managed by three pension fund managers (PFMs) — LIC Pension Fund, SBI Pension Fund, and UTI Retirement Solutions. The total corpus of the government employees as on December 2011 was Rs 12,769 crore.

            These three fund managers are also eligible for participating in the bidding process, the regulator said. The total average monthly subscriptions of government employees is around Rs 500 crore.

Pension fund regulator makes the right move

The pension fund regulator has done well to raise the commission for distributors of the National Pension System (NPS). A higher return for the banks and financial institutions that open NPS accounts for subscribers will motivate them to market the scheme better.

From January 16, distributors are charging Rs 100 to open an account and 0.25% of the amount contributed initially by the subscriber, subject to a minimum of Rs 20 and a maximum of Rs 25,000. A subscriber is also being charged 0.25% for every transaction. PoPs can negotiate these charges with subscribers, but that is going to be cumbersome. Also, the amount is meagre at the lower end.

NPS fees to be charged as per the Quantum of Contribution

As far as New Pension Scheme is concerned, the charges to be collected by Point of presence (Centers where NPS subscribers would pay their contribution) for the services rendered by them is until now is Rs.20 per transaction.

Because of this low rate fixed by the Pension regulation authority (PFRDA), the banks which mainly act as point of presence are reluctant in the transactions relating to NPS.  As a result number of New Pension Scheme subscribers from the private sector is very meager now.

In order to make Point of presence to actively participate in the New Pension Scheme Transactions and thereby increase the number of Private NPS subscribers, PFRDA has decided to allow Point of Presence to charge fees based on the quantum of contribution /investments  made the subscribers.  The following Note issued by PFRDA in this regard would give more details.

These changes in the fees will be applicable only for private (Non-Government) sector NPS subscribers.

PENSION FUND REGULATORY AND DEVELOPMENT AUTHORITY

16TH January’ 2012

PRESS RELEASE

Initiating the implementation of the recommendations of the Bajpai Committee to Review

NEW PENSION SCHEME

New Pension Scheme (NPS) is a defined contribution scheme, its pay out depends upon the amount of contribution and the growth on the investment over a period of time for an individual while defined benefit schemes pay out is defined and is based on salary and number of years in service etc. at the time of retirement of an individual. 

At the time of normal retirement after attaining 60 years, the subscriber can withdraw 60% of the accumulated wealth and will be required to invest remaining 40% of the accumulated wealth to buy a life annuity from insurance company approved by Insurance Regulatory and Development Authority (IRDA). The mandatory provision of annuitisation will be invested to buy life annuities as per various options available to him. The amount of annuity varies depending upon the option selected by him. Registration of ASPs (Annuity Service Providers) is under process and as soon as they get registered, other details will be made available. 

In old pension scheme government pays pension after retirement as its liability while in NPS government co-contributes to employee during his service period to build up a corpus on which annuities will be paid. 

This information was given by the Minister of State for Finance, Shri Namo Narain Meena in written reply to a question in the Rajya Sabha today.