New Delhi: IDFC, one of the fund managers of National Pension Scheme (NPS), today said the proposed revision in fund management charges will help sustain the retirement fund industry in the long-run as all players are losing money under the present fee structure.
“The proposal to raise fund management charges in NPS will sustain the pension fund industry in the long-run as all players are losing money with the current charges,” IDFC Chief Executive for Pension Funds Vikash Raj told reporters here.
He said as per the revised NPS guidelines, management charges will be revised soon, which is a welcome step.
At present, fund management fee is a dismal 0.0009 per cent per Rs 10 lakh in which all fund managers are losing money.
However, the revised guidelines have a provision for raising the commission with a cap provided by the pension fund regulator, PFRDA.
“If it (the charge) is fixed at around 0.25 per cent, then the business model will be sustainable,” Raj said.
Reacting to new norms about appointing any number of fund managers from the existing six, he said this would help in garnering a higher number of subscribers.
Total corpus of NPS, a contribution-based scheme launched in May 2009, is around Rs 18,000 crore, majority of which is contributed by the public sector employees.
“As the number of players (fund managers) increase, this will help in raising the investor base,” Raj said.
NPS, among the low-cost pension schemes in the world, has failed to take off among general public and private sector employees due to less awareness about the plan, he said.
“As awareness increases, the NPS is likely to become popular among the private sector employees and general public,” he added.