Pension funds face quarterly review

Pension funds face quarterly review
Funds under the New Pension Schemes (NPS) managed by SBI Pension Fund — an arm of State Bank of India — has outperformed its rivals for the fiscal gone by, data on the pension regulator’s website revealed. Pension laws mandate that fresh annual allocations to fund managers be made on the basis of their performance in the past year.

Pension Fund Regulatory and Development Authority (PFRDA) has now instituted an independent, quarterly review of the seven pension funds for monitoring their performance and compliance to investment guidelines. Morningstar, a mutual fund data research firm, will be conducting periodic reviews on fund managers, its CEO Aditya Agarwal told ET.

SBI Pension Fund has performed better than its rivals with highest net asset value for both central and state government scheme in 2009-10. For Central government employees schemes, SBI Pension Fund NAV ended March 31 at 12.77, LIC Pension Fund at 12.35 and UTI at 12.33, according to the PFRDA website.

Employee’s Provident Fund Organisation (EPFO) has traditionally provided retirement benefits to government employees. However, civil servants, who were recruited after 2004, are now part of the NPS — a system aimed at encouraging private fund managers. According to estimates, its current corpus stands at around Rs 4,700 crore.

Up for grabs now are their contributions this year — expected to be in the Rs 2,400-crore range. PFRDA allocates fresh accretions every April, depending on the performance of each of the three funds.

In the first year of NPS, PFRDA allocated only Central government employee contributions and last year, it additionally allocated funds to state government pension funds. For state government schemes, SBI Pension Fund’s NAV stood at 10.63, LIC Pension at 10.60 and UTI at 10.59, as per PFRDA data.

Industry officials say the pension fund allocation of Central and state government employees is expected to take place sometime in the second or third week of April. Last year, the allocation was made sometime in May. For 2009-10, PFRDA has allocated 40% to SBI Pension, 31% to UTI Pension and 29% to LIC Pension.

Under NPS, employees have to contribute 10% of their basic salary and dearness allowance, with a matching contribution from their employers. The NPS was thrown open to the unorganised sector last year and private players were also allowed to operate as fund managers. However, the response to NPS from the general public has been modest.

In addition to SBI, LIC and UTI, ICICI Prudential, IDFC, Kotak and Reliance MF also manage pension funds.

Source:Economic Times