PFRDA hikes pension FDI limit to 74 per cent
Foreign firms can directly or indirectly hold up to a 74 per cent stake in pension funds with the Pension Fund Regulatory and Development Authority (PFRDA) notifying the new revised limit. The Union cabinet had earlier increased the FDI limit from 49 per cent.
The amendment to the pension fund regulations comes on the heels of the regulator opening the “on tap” window for licences to pension fund managers on June 30. Such a window allows applicants to seek a licence at any time, speeding up the entire process of setting up a business.
In March this year, Parliament had given its approval to raise the FDI limit in the insurance sector to 74 per cent from 49 per cent. Finance minister Nirmala Sitharaman in her budget speech this year had announced the increase in the FDI limit. With the latest move of the PFRDA, the FDI limit in pension funds is aligned with that of the insurance sector.
At present, more than 4.28 crore subscribers are registered under various schemes under the National Pension System (NPS) and other pension schemes of the PFRDA, with the total assets under management (AUM) in excess of Rs.6 lakh crore as of June this year, the regulator said.
LIC Pension Fund, SBI Pension Funds and UTI Retirement Solutions are the fund managers for the public sector. For the private sector, apart from these three, there are four others: HDFC Pension Management, ICICI Prudential Pension Fund Management, Kotak Mahindra Pension Fund and Aditya Birla Sun Life Pension Management.
“Opening up the pension fund sector to a higher limit of FDI is likely to foster competition and boost growth of Indian pension fund sector. Global experience of managing billions of dollars of pension fund money can now be put to use for managing Indian national pension funds,” analysts said.
They said the increase in FDI would be beneficial as several firms needed capital for their expansion. Besides, existing fund holders will be able to sell their excess stakes, while foreign companies will provide new products, technology and help to increase the reach of pensions.
The regulator had recently allowed an increase in the fund management fee. The funds, charging 0.01 per cent as management fees, have been permitted to charge up to 0.09 per cent if the assets under management is less than Rs 10,000 crore.
For assets from Rs 10,000 crore to Rs 50,000 crore the fees will be 0.06 per cent. It is 0.05 per cent for funds between Rs 50,000 crore and Rs 1.5 lakh crore and 0.03 per cent for funds above Rs 1.5 lakh crore.