IDFC Pension Fund, one of the six pension funds managing NPS investments, has decided to quit even as four new pension funds are set to join the government-run pension scheme.
The IDFC Pension Fund managed assets worth Rs 1,500 crore. These funds will move to SBI Pension Fund, which already manages NPS funds of government employees as well as other investors. "Investors are free to continue with SBI Pension Fund or switch to any of the existing or new pension funds," says Pension Funds Regulatory and Development Authority (PFRDA) Chairman Yogesh Agarwal.
The five other pension funds that managed NPS investment, including SBI Pension Fund, ICICI Prudential Pension Fund, Kotak Pension Fund, Reliance Pension Fund and UTI Retirement Solutions, have renewed their term with the NPS. The LIC Pension Fund, which manages only the NPS funds of government employees, has also renewed its term.
IDFC Pension Fund's decision to bring down the shutters comes at a time when the annual NPS fund management charges have been raised from 0.0009% (Rs 9 per Rs 10 lakh) to 0.25% (Rs 2,500 per Rs 10 lakh). The "ridiculously" low charge was a bone of contention for the NPS, with pension funds showing little interest in pushing the scheme that earned them a pittance. Mutual funds are allowed to charge 2-2.5% (Rs 20,000-25,000 per Rs 10 lakh) per years while insurance buyers pay 1-2% (Rs 10,000-20,000) annually besides other charges in the initial years.
IDFC Pension Fund did not respond to queries on the reasons for pulling out. In August, CEO Vikas Raj had told reporters that NPS fund management charges needed to be hiked to make it feasible for fund managers. Welcoming the PFRDA proposal to hike the charges, he said "if the charge is fixed at around 0.25%, then the business model will be sustainable.""
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