SBI, UTIAMC and LIC will be the first sponsors of pension funds in the country under the new pension system for government employees.
The three will manage about Rs 2,000 crore
NEW DELHI: State Bank of India (SBI), UTI Asset Management Company (UTIAMC) and Life Insurance Corporation (LIC) will be the first sponsors of pension funds in the country under the new pension system (NPS) for government employees.
A committee constituted by the Pension Fund Regulatory and Development Authority (PFRDA) chose the three from a field of four eligible bidders, which also included IDBI Capital Market Services Ltd.
The three entities would float their respective pension funds to manage the money that has been lying in public account since the government switched over to the contributory pension scheme for all fresh recruits at the Centre from January 1, 2004.
All states, barring the three Left-ruled ones, have also adopted the new pension system for their staff. At present, a total of about Rs 2,000 crore is available for fund management under NPS.
Pending the passing of the PFRDA Bill in Parliament, the Centre and the participating states have agreed to allow the funds under the NPS to be invested in the same manner as is allowed under the investment guidelines for employees’ provident fund (EPF).
This implies that most of the funds would have to be invested in central and state government bonds and in public-sector bonds. Only 10% of the funds are allowed to be invested in equities and triple A-rated corporate bonds.
It was also part of the deal between the Centre and the states that only public sector entities will be allowed to sponsor pension funds to manage NPS money. Foreign stake of up to 26% is allowed in pension funds as is the case with life and general insurance companies.
PFRDA had invited expressions of interest (EoI) from public sector entities for sponsoring pension funds for government employees on May 11, 2007. To be eligible, the sponsors were required to have at least 5 years’ experience of fund management and average assets under management of not less than Rs 10,000 crore.
The last date for submission of EoI was May 25, 2007. In response, EoIs were received from seven public sector entities — Canara Bank, IDBI Capital Market Services Limited, LIC, SBI, UTI AMC, Securities Trading Corporation of India Limited and Punjab National Bank.
Of these seven entities, four were found to be eligible. They were invited for issuance of request for proposal (RFP) for sponsoring pension funds. Proposals from all the four entities, including technical and commercial bids, were received by PFRDA by the deadline of July 4.
The PFRDA evaluation committee has short-listed the three best value bidders in terms of requirements (technical and commercial) of RFP. The report of the committee is under the consideration of the PFRDA, an official release said.
Meanwhile, the contract between PFRDA and NSDL is under finalisation and work relating to the central record-keeping agency activities will commence as soon as NSDL obtains the approval of the Securities and Exchange Board of India.
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