SBI, LIC, UTI-AMC to manage pension funds

A committee constituted by the Pension Fund Regulatory and Development Authority (PFRDA) has selected State Bank of India (SBI), UTI Asset Management Company (UTIAMC) and Life Insurance Corporation (LIC) to be the first sponsors of pension funds in the country under the new pension system (NPS) for government employees.

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. As per estimates, about five-lakh Central and state government employees have joined the scheme since it came into being on January 1, 2004, leading to accumulation of around Rs 2,000-crore pension fund corpus.

Under the NPS, employees have to contribute 10 per cent of their basic salary and dearness allowance, with a matching contribution from their employer. This contributory system is in contrast to the earlier system, in which employees used to get defined returns.

The sponsors will have to offer alternative products to employees including risk-free options under which all funds would be invested in government securities, and share-market linked products with variable returns as well.

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.

Pension Fund Regulatory and Development Authority (PFRDA) had invited Expressions of Interest (EOI) from public sector entities for sponsoring Pension Funds for Government employees on 11th May 2007. In response, EoIs were received from seven public sector entities namely, Canara Bank, IDBI Capital Market Services Limited, Life Insurance Corporation of India, State Bank of India , UTI Asset Management Company Private Limited, Securities Trading Corporation of India Limited and Punjab National Bank.

NOTE- Pension Fund Regulatory and Development Authority was established by the Government of India on 23rd August 2003 to promote old age income security by establishing, developing and regulating pension funds, to protect the interests of subscribers to schemes of pension funds and for matters connected therewith or incidental thereto.

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