India’s regulators expand profit space for NPS fund managers
05 September 2012
News, Asia, India
By Toby Garrod
India’s regulators have decided to move ahead with a significant rise in pension fund management fees to make it a more viable business for its fund managers, the Pension Fund Regulatory and Development Authority, announced on Friday (August 31).
The PFRDA has allowed fund managers for the private sector National Pension Scheme (NPS) to fix their fund management fees with a cap at 0.25% of AUM. The new charges will come into effect from November 1. The regulator hopes this will help sustain the NPS for the unorganised sector as fund managers are losing money under the current fee of a just 0.0009% per million Indian rupees. The move follows a report from the GN Bajpai Committee that was set up to review the poor coverage of the NPS. It suggested the PFRDA should have a more dynamic fee structure, in which fund management charges would decline as the size of the AUM increased.
“This is applicable to all schemes for private and corporate sector subscribers... The pension fund managers (PFMs) will be permitted to revise the investment management fee, once in a year,” the PFRDA said, adding that PFM fees for NPS Lite/ Swavalamban would be same as that for government employees at 0.0102% per annum.
Envisioned as a retirement saving scheme for the unorganised and informal sector workers, fund management fees under the NPS for private citizens had been kept much lower than other long-term saving products.
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