India: Pension regulator reviews fund managers’ cost structure

India’s pension regulator is reviewing the cost structure of pension fund managers and other intermediaries and plans to revise their rates, ahead of appointing more fund managers.

“We are doing a cost-benefit analysis and definitely very soon we will see some changes in the cost structure for pension fund managers and other intermediaries,” Mr Supratim Bandyopadhyay, chairman of the Pension Fund Regulatory and Development Authority (PFRDA), said.

The regulator will invite request for proposals (RFP) from pension fund managers by December so as to offer wider choice to subscribers, reported The Economic Times.

Mr Bandyopadhyay said, “The RFP for pension fund managers may take about two and a half months. By December definitely we will see the RFPs out, and everybody is welcome.”

While the cost of the National Pension System, which the PFRDA oversees, is one of the lowest in the world, it cuts both ways, Mr Bandyopadhyay said. Subscribers to NPS are currently charged 0.01% of the corpus as fund management charge. This means low revenue streams for pension fund managers who have to account for brokerage charges, audit fees, and other costs. He had earlier said that fund managers’ revenues were very low and needed to be increased in order to attract talent from the market.

PFRDA has been keen to appoint additional pension fund managers and received the Finance Ministry’s nod last December for it to do so. At present, there are eight pension fund managers under the NPS.