The pension fund managers to whom you have entrusted your NPS money after carefully checking out their track record can change based on the PFRDA's selection process.
Once in every three or four years, the Pension Fund Regulatory Authority (PFRDA) reboots the line-up of fund managers who manage its assets by calling for fresh bids from prospective asset-management firms.
While inviting these bids, the PFRDA specifies how many managers it will select and also lays down many conditions based on which NPS managers will be hired or rejected.
The seven private fund managers who now manage your NPS money - LIC, SBI, UTI, ICICI Prudential, Kotak Mahindra, Reliance Capital and HDFC - were appointed way back in 2014.
With their term shortly set to end, the PFRDA is already in the process of finalising a new set of fund managers from this year.
While inviting fresh bids in 2016, it tweaked its selection criteria a bit. It decided to expand the number of fund managers who will figure on the NPS menu from 8 to 10. It had also decided not to shortlist managers based on their ability to bid rock-bottom fees and decided to give more weight to qualitative criteria. Therefore, in this round of bidding, the asset managers who threw their hat into the ring were asked to bid on the fees for investment management subject to an upper limit of 0.1 per cent of assets managed. Last time around, every selected manager was forced to accept the lowest fees bid, which was a miserly 0.01 per cent (1 basis point).
To ensure that larger and more serious players take part in the bids, the PFRDA has placed a minimum net-worth criterion of Rs 50 crore for bidders, up from Rs 25 crore earlier.
News reports suggest that the bidding process was completed in November 2016, with nine interested firms participating. The bids received showed that SBI Pension Fund and LIC Pension Fund submitted the lowest bids, with management fees at 0.07 per cent, while other managers (Reliance Capital, DSP Blackrock, HDFC, Kotak Mahindra) bid between 0.08 per cent to 0.10 per cent as
their fee.
The pension managers who are selected by PFRDA will be appointed for a period of five years and will be allowed to charge whatever fee they bid within the regulatory cap of 0.10 per cent on an annual basis.
The final appointment process is yet to be completed.
This article is part of a series of articles titled How the NPS has changed.
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