Vol. IV Issue IV

May 2015

Pension Bulletin

Pension Fund Regulatory and Development Authority 1st Floor, ICADR Building, Plot No.6 Vasant Kunj Institutional Area, Phase-II, New Delhi-110070 Ph.: 011-26897948, Fax: 011-01126897938, Website: www.pfrda.org.in

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CONTENTS

Page No.

NPS at a Glance … 2

Developments in Pension Sector/PFRDA … 4

Understanding NPS … 10

From the Press … 12

Macroeconomic Developments … 19

Financial Market Developments … 20

Macroeconomic Statistics … 21

NPS Statistics … 22

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NPS at a Glance

Sl. No.

Employer/Sector Number of Assets Under Management

(In Rs. crore) subscribers

As on 7

th

April 2015 As on 7

th

May 2015

% Change (m-o-m)

As on 7th

April 2015

As on 7th

May 2015

% Change (m-o-m)

1 Central Government 1,512,373 1,526,622 0.94 36,921 37,254 0.90

2 State Government 2,632,824 2,658,949 0.99 37,976 38,481 1.33

3 Private Sector 461,524 471,117 2.08 6,361 6,443 1.29

4 NPS-Lite 4,237,766 4,467,973 5.43 1,629 1,700 4.36

Total 8,844,487 9,124,661 3.17 82,887 83,877 1.19

5 Tier II Accounts

Activated 13,577 14,536 7.06

The number of subscribers under NPS have increased from 88.44 lakh as on April 7,

2015 to 91.24 lakh as on May 7, registering a growth of 3.17%. The main contributor to

the growth is subscribers under NPS Lite, which has increased by 5.43% during the

same period. NPS Lite subscribers constitute 48.97% of total NPS subscribers.

AUM under NPS have increased from Rs. 82,887 crore as on April 7, 2015 to Rs.

83,877 crore as on May 7, 2015, registering a growth of 1.19%. AUM under NPS Lite

have shown the highest growth of 4.36 % among all sectors. However, state

government’s contribution is the highest in the total AUM which constitute 45.88 % of

the total AUM.

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Scheme Returns

1 Year Return (In %) Pension

Funds→ SBI LIC UTI ICICI RELIANCE KOTAK HDFC Benchmark

Schemes↓

CG 17.81 17.46 17.07 17.73

SG 18.21 17.92 17.31 17.73

Corporate-CG 18.44 18.06 17.73

TIER I E 23.74 22.25 24.02 24.00 23.71 23.75 23.87 23.64

C 14.79 14.50 14.08 15.74 14.60 14.48 14.67 16.30

G 19.43 19.58 18.88 19.12 18.85 17.99 18.56 18.01

TIER II E 23.95 16.51 25.21 24.03 23.32 23.65 18.01 23.64

C 14.63 11.83 14.20 15.76 14.40 14.15 9.10 16.30

G 19.32 18.31 18.99 19.11 18.92 18.37 18.04 18.01

NPS Swavalamban 17.98 17.87 17.53 17.82 17.73

Since Inception (annualized) (in %)

Pension Funds→ SBI LIC UTI ICICI RELIANCE KOTAK HDFC

Schemes↓ CG 10.42 10.09 9.91 SG 9.89 10.23 9.99 Corporate-CG 10.80 11.34

TIER I

E 9.73 19.98 12.29 12.82 11.60 11.06 25.20 C 11.40 12.92 9.61 11.26 9.31 11.05 12.87 G 10.07 14.49 8.50 8.81 8.15 8.48 12.72

TIER II

E 9.21 8.80 9.50 9.54 9.69 9.88 14.82 C 10.93 9.36 9.85 11.31 8.98 9.43 9.15 G 10.30 14.80 9.85 9.22 8.47 8.24 14.09 NPS

Swavalamban 11.28 11.12 11.24 7.87

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Developments in Pension Sector / PFRDA

FDI in pension Sector

In pursuance of enactment of Insurance Regulatory & Development Authority Act, 2013

Government has decided to permit FDI in pension sector as under:

Sector/ Activity % of FDI Cap/Equity Entry Route

Pension Sector 49% {FDI+FPI (FII, QFI) + NRI+FVCI+DR}

Automatic upto 26% Government route beyond 26% and upto 49%

Other conditions

1) FDI in the Pension Funds is allowed as per the Pension Fund Regulatory and

Development Authority (PFRDA) Act, 2013.

2) Foreign Investment in Pension Funds will be subject to the condition that

entities bringing in foreign equity investment as per Section 24 of the PFRDA

Act shall obtain necessary registration from the Pension Fund Regulatory and

Development Authority and comply with other requirements as per PFRDA Act,

2013 and Rules and Regulations framed under it for so participating in Pension

Fund Management activities in India.

3) Wherever such foreign equity investment involves control or ownership by the

foreign investor or, transfer of control or ownership of an existing pension fund

from resident Indian citizens and/or Indian companies owned and controlled by

resident Indian citizens to such foreign investing entities as a consequence of

the investment, including through transfer of shares and or fresh issue of

shares to Non-Resident entities through acquisition, amalgamation, merger

etc. it would require FIPB approval in consultation with the Department of

Financial Services, PFRDA and other entities concerned and the onus of

compliance of these conditions will be on investee India pension fund

company. The meaning of ownership and control would be as per the Foreign

Direct Investment Policy.

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Following circulars/guidelines have been issued by PFRDA during the month

of April 2015 & May 2015

Incentive for mobilization and registration of subscribers under Atal Pension Yojana dated 19th May 2015

The Atal Pension Yojana is being implemented through public sector banks, private sector

banks, regional rural banks, states apex co-operative banks, urban cooperative banks and

district central cooperative banks which are on Core Banking Solution (CBS) module. In

consultation with the Department of Financial Services, Ministry of Finance, it has been

decided that under Atal Pension Yojana for mobilizing each account the Banks will be paid an

incentive as under:

S no Number of subscribers under APY with

each Bank

Incentive for promotional efforts (only for

new accounts opened during the year)

1 Less than 1 lakh Rs 120/-

2 More than 1 lakh upto 3 lakh Rs 130/-

3 More than 3 lakh upto 5 lakh Rs 140/-

4 More than 5 lakh Rs 150/-

2. As Banks are expected to engage the Banking Correspondents (BCs) / Micro Finance

Institutions (MFIs) / Non-bank aggregators to mobilize the subscribers, they can share the

incentives with such BCs / MFIs / Non-bank aggregators etc. in the ratio 50:50 :: Banks :

BCs/MFIs/ Non-bank aggregators.

3. Banks are advised to contact aggregators for shifting of existing eligible Swavalamban

subscribers to APY as per the scheme.

4. Payment of incentives to banks each year will be made after the completion of the

financial year on receipt of funds from the government.

Atal Pension Yojana (APY)

Atal Pension Yojana has been launched by the Government on May 9, 2015. Under the

scheme, subscribers would receive a fixed minimum pension of Rs.1,000-5,000 per month at

the age of 60 years, depending on their contributions, which itself would vary on their age of

joining.

The central government would also co-contribute 50 percent of the total contribution or

Rs.1,000 per annum, whichever is lower, to each eligible subscriber account, for a period of

five years - from 2015-16 to 2019-20 - to those who join the APY before December 31, 2015

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and who are not members of any statutory social security scheme and are not income tax

payers.

The pension would also be available to the spouse on the death of the subscriber and

thereafter, the pension corpus would be returned to the nominee.

The minimum age of joining APY is 18 years and maximum age is 40 years.

The benefit of fixed minimum pension is guaranteed by the government.

PFRDA has issued details of Atal Pension Yojana scheme giving benefits, eligibility, age of

joining and contribution period, enrolment and subscriber payment, enrolment agencies,

operational framework, funding, migration of subscribers of Swavalamban scheme to APY,

penalty for default, investment of contribution, exit and pension payment, tables for

contribution levels and amount of monthly pension etc. For details click here .

Report of the committee to review investment guidelines for national pension system

(NPS) schemes in private sector

A committee was formed by PFRDA in the month of September 2014 under the

chairmanship of Sh. G.N. Bajpai for review of investment guidelines for NPS schemes in

private sector. The committee has submitted its report and the main recommendations of

the committee are as under:

1. Moving from Directed investment regime to the prudent investor regime which should be

based on following principles:

a) Harmonization of the Investment Guidelines for Private and Govt Sector

b) Review of ceiling for each asset class

c) Expanding the universe of instruments under each Asset Class

d) Adding new Asset Classes

e) Allowing the entire corpus of NPS to be managed by both private and public sector funds

2. Harmonizing the investment mandates across various Regulatory Regimes within the

domain of pension sector. To begin with, the Committee suggested harmonizing the

investment guidelines within NPS across Government and Private Sector i.e. loosening the

guidelines for Govt sector to allow more play to the Pension Fund managers in asset classes

like equity.

3. The restriction of allowing Pension funds only from the public sector to manage the funds

of Government employee subscribers may be done away with.

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4. On the road to Prudent investor regime, the Regulator may, in the interim allow

introduction of a few new schemes to test the risk appetite of the subscribers and build their

confidence in asset classes perceived to be riskier viz Equity through the life Cycle fund

approach. While the existing life cycle Fund shall continue to be the one with maximum

investment in equity pegged at 50% (option LC50), more life cycle funds (at least two more to

begin with) may be introduced.

5. The Broad road map for moving to Prudential investor regime , based on principles

defined above would be as follows:

Phase I

a) Allowing private sector PFs to manage the funds of the Government sector employees

b) Harmonization of the investment guidelines of the government and private sector.

c) Shift away from the fixed income fixated investment pattern and allowing more play to

pension fund managers in equity through following measures;-

Allowing investment in equity to the extent of 50% by Government sector employees/

NPS lite subscribers.

Allowing floating of life cycle funds with equity cap at 75% Moving away from passive

investment to active investment in equity.

Allowing investments in shares, which have derivatives in any stock exchange.

Expanding the universe of investment of equity to NSE 100.

d) Allowing investments in equity both through primary and secondary market. Allowing

investment in Mortgage backed securities, Covered notes, CPs, CDs

e) Allowing investments in Infrastructure Trust Funds.

f) Removal of limits on SDLs under “G”

g) Introduction of new asset classes within overall cap of 5% of the portfolio.

Real estate through REITS

Alternative Investment Funds ( AIF) registered with SEBI

Phase II

a) Raising the ceiling on equity to 75%

b) Further loosening ceilings on AIFs, REITS, INFRA-REITS

c) Introduction of IDRs

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d) Allow CBLO in both Corporate bonds and Government bond

e) Allow Repo and Reverse Repo.

f) Introduce commodity trading viz bullion through Gold ETFS with ceilings of 1%

Phase III

a) No ceilings on asset classes

b) Only a negative list of assets and instruments based on the experience of last 5 years

c) Some prudential ceilings viz concentration ceilings etc or risky and volatile asset classes/

instruments.

6. PFs may be allowed to market the NPS product. The PFs may canvass the product while

the actual on-boarding may be done through the PoPs. Also, a cadre of independent financial

advisors may be developed who could offer this product as a part of this financial planning.

7. A fixed and variable component in the management fee of PFs may be introduced, with

pension funds being incentivized to quote lowest fixed fee in the bid. However, the variable

fee shall depend upon other performance indicators viz relative Returns generated etc.

8. A dynamic and comprehensive asset-liability management module, which could include,

among others, prudential duration gap limits, prudential limits for interest rate sensitivity and a

structural liquidity framework may be prescribed by the regulator to efficiently manage the

Asset Liability Management to meet the payouts at least cost to the system at the time of exit

of the subscribers.

9. For generating healthy competition and meeting the standard of transparency, a

framework for disclosures about the performance of pension funds disclosing returns

generated, risk management parameters, which includes a judicious mix of returns generated

viz Risk adjusted returns, Yield to Maturity (YTM), and Tracking Error besides risk parameters,

impact on safety of funds viz Concentration (Issuer & Industry), Liquidity, Credit Quality, and

Maturity profile has been recommended.

10. PFRDA should institutionalize professional organizations of analysts, retirement advisors

or consumer protection forums aimed at analyzing the data, comparisons, and evaluation of

the Pension funds’ performance for the benefit of subscribers and also for evolving

benchmarks.

11. To develop a contiguous pension system involving collection, investment, fund

management, record keeping and pay outs for orderly growth of the pension sector, any

Scheme aimed at accumulation of funds for providing old age income security by way of

annuity, or pension etc. shall be registered and regulated by PFRDA.

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12. The tax treatment of EET for NPS compares unfavorably with Govt employees joining

prior to 1.04.2004 - wherein commutation of pension is allowed exemption from taxation at the

time of retirement and all other long term saving instruments such as mutual funds, LIC, PPF,

GPF etc which enjoy tax benefits at the time of withdrawal. In order to ensure development of

the pension sector in general and NPS in particular, it is essential that distortions across

financial instruments and group of assesses are resolved and appropriate fiscal incentives are

provided.

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Understanding NPS

In the last issue of our Monthly Pension Bulletin we had talked about the overall architecture

of the National Pension System. In the present issue we will discuss about the Point of

Presence and its roles and functions.

The Government of India (GOI) has rolled out the NPS for all citizens from May 1, 2009.

Hence, various facilities (like opening Permanent Retirement Account, contributing to NPS

etc) required to be provided to all the citizens (known as ‘Subscribers’ in the NPS architecture)

at various locations across India are carried out through the entities known as Points of

Presence (POPs) appointed by the PFRDA. POPs are the first point of interaction between

the subscriber and the NPS architecture. POPs provide the services under NPS through their

network of branches called POP Service Providers (POP-SP). They perform the functions

relating to registration of subscribers, undertaking Know Your Customer (KYC) verification,

receiving contributions and instructions from subscribers and transmission of the same to

designated NPS intermediaries. PoP(s) and their authorized branches (PoP-SPs) shall also

be required to comply with the provisions of the Prevention of Money Laundering (PML) Act ,

2002 and the rules framed thereunder, as may be applicable, from time to time.

The main functions undertaken by POP/POP-SPs are as under:

To receive the duly filled application form along with the KYC documentation and verify

KYC documents as may be required from time to time.

To collect and verify contributions that may be received through cash/cheque/Demand

Draft/Electronic Clearing System (ECS).

To collect/deduct NPS application processing fees and issue of receipt to the

Subscriber against the same.

To submit complete and accepted forms on a daily basis, to CRA/CRA Facilitation

Centre (FC).

To upload the subscriber contribution files into CRA system and simultaneously

arrange to transfer the funds into the account of the NPS trust maintained with the

Trustee Bank on at least T+1 basis.

To maintain and report records of all transactions in accordance with the provisions of

PML Act, 2002 and Rules framed thereunder, as may be applicable, from time to time.

Verify PRAN card details on the deposit slip, the format for which shall be prescribed

by PFRDA.

Services to the subscribers

Carry out changes in subscriber details on request by subscriber subject to the

conditions stipulated by PFRDA.

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Receiving switch request for change in PFM and/or investment option from subscriber

and transmitting the same to CRA.

Receiving withdrawal requests from subscriber and transmitting the same to CRA.

Attending to subscriber’s request for shift to another PoP-SP.

Any other NPS account related service as may be prescribed by PFRDA from time to

time

Grievance handling

Receiving of grievances submitted by the subscriber against PoP / PoP-SP or any

other NPS Intermediary in the format prescribed by PFRDA and uploading of all

grievances in the Central Grievance Management System (CGMS) of CRA on a daily

basis. The CGMS system of CRA routes the grievances to respective NPS

intermediaries.

Receiving grievances raised by the subscriber against PoP/PoP-SP through the CRA

call center/CGMS of CRA by accessing the CGMS.

There are currently 63 entities which have registered themselves as POPs under NPS.

However, the number of Point of Presence may go up or down depending on the new

registrations and non-renewal or termination of registrations of Point of Presence. For the

current information on the Point of Presence and their service provider branches, one may

visit https://www.npscra.nsdl.co.in/pop-sp.php

The next issue of Pension Bulletin will cover Aggregator and its roles and functions.

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From the Press

“World Employment Social Outlook: The changing nature of jobs” released by International Labour Organisation on 18th May 2015

The International Labour Organization has released “World Employment Social Outlook: The

changing nature of jobs” on 18th May 2015. According to the Report, by 2013, 93 per cent of

the 178 countries under analysis provided pension benefits by law. This compares with only

about one-third of countries in the 1950s. In most regions, pension benefits represent the

largest component of social protection expenditure. Since 1990, many countries in the

developing world have adopted new laws or reformed existing legislation to improve coverage.

They have done so through various means: establishment of large-scale non-contributory

pensions; expansion of coverage under existing schemes, by relaxing or removing conditions

for eligibility; and/or development of specific schemes for the self-employed. These changes

corrected inappropriate terms that had excluded the majority of the population. The observed

trend reflects a change in fundamental policy thinking. Based on experience, the expectation

that economic growth would draw workers into formal employment and thus provide them with

social protection was shown to be unrealistic. Instead, the more recent policy goals recognize

that social protection should be extended to groups outside of standard employment

relationships.

In 2013, 77 per cent of people of working age were legally covered by an old-age pension,

compared with 47 per cent in 2000 and 32 per cent in 1990. Legal pension coverage for

women is lower than for men. Indeed, 74 per cent of women are legally covered, of which only

26 per cent are covered by compulsory contributory schemes. This reflects lower labour

market participation among women and their over-representation in sectors or employment

statuses less likely to be covered by legislation.

Countries in Asia and the Pacific and in Latin America and the Caribbean are at the forefront

in terms of increasing legal coverage. In Asia, just over 10 per cent of the working-age

population was legally covered in 1990. This proportion almost tripled between 1990 and

2000, and doubled again from 2000 to 2013. This expansion was largely supported by the

development of non-contributory pensions and by the introduction of legislation allowing

voluntary affiliation to contributory schemes. The two largest countries in the Asia region,

China and India, provide important examples. In Latin America, reforms have focused on

extending pension systems to workers outside the formal economy. By 2013, more than 90

per cent of people of working age (including informal workers) were legally covered by a

pension scheme, compared with 60 per cent in 1990. Although non-contributory schemes

have existed for decades, the observed trend in the past few years is unprecedented in terms

of the intensity and speed of expansion. Between 2000 and 2013, at least 18 countries in the

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region introduced reforms to increase pension coverage through non-contributory schemes

(World Bank, 2014; ILO, 2014a).

Indians fall short on retirement planning: Reliance Capital MF survey

India’s per capita retirement assets and pension assets as a percentage of GDP is just 15.1%

Livemint,

Though India is the second-most populated country in the world, retirement planning is still not

a priority here, data from the retirement survey by Reliance Capital Asset Management Co.

Ltd along with IMRB International shows.

While the government has started talking about the need for an organized social security and

pension system, the idea apparently has not yet dawned in the minds of working individuals

as traditional Indian society always expects the next generation to take care of their elderly

parents.

India’s per capita retirement and pension assets as a percentage of the gross domestic

product is at 15.1%, one of the worst in the world, says the research report. According to the

Global Benefits Attitudes Survey conducted last year by global professional services company

Towers Watson, 78% of Indian employees recognize that they will need to save more for

retirement.

In the survey, only 15% of Indian respondents in the 30-55 age-group claimed to have

planned for retirement. This may mean that a majority of the population is either planning to

rely on pension, or on physical assets such as real estate and gold, or on their children.

If you consider an average inflation rate of 7% and a retirement date at least 30 years away,

each rupee you have today will be worth only 13 paise. In other words, you will have to make

your money increase at least 7.6 times today simply to match up with inflation. Also, you need

to earn returns to grow your corpus.

“Most people don’t want to compensate on lifestyle after retirement. So they want to build a

corpus that can not only cater to comfort throughout their remaining life but also manage

fancies like catering to grandchildren and travelling,” says Suresh Sadagopan, a Mumbai-

based financial planner.

According to Manish Shah, co-founder and chief executive officer, Big Decisions.com,

“Everyone appreciates that you have to start saving early for retirement but the actual

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investments get relegated to secondary status as other issues such as buying real estate and

children’s needs take over.”

Sadagopan says one has to allocate to different kinds of products based on the stage of

investment and needs. The stage of investment refers to how far you are from retiring. For

example, if you have at least 10-15 years left to retirement, investing in equity-linked products

is suitable as these are flexible products that help beat inflation in the long run and are also

tax effective. Such products are equity mutual funds, including retirement funds, equity-linked

insurance and pension plans, and the National Pension System. You can also allocate to low-

risk high-interest options such as Public Provident Fund (PPF).

If you are already close to retirement, a higher orientation to fixed-income investments is

preferred. This includes products such as debt mutual funds, tax-free bonds, non-convertible

debentures and even fixed deposits. “The choice of products depends on each individual’s

need for flexibility, tax effectiveness and risk preference,” says Sadagopan.

According to Himanshu Vyapak, deputy chief executive officer, Reliance Capital Asset

Management Co. Ltd, “In our retirement fund (launched in February 2015), around 66%

assets have come to the wealth creation option, which predominantly invests in equity. But

also 95% of the investors came in this option, which shows that investors are looking at

accumulating wealth for retirement.” The scheme has around 50,000 investors, he says.

The Reliance Capital AMC’s research found that 90% of assets are allocated to fixed income.

Ideally, if you have time on your side and retirement is at least 10 years away, consider

systematic investments in assets that can beat inflation in the long run. This can be done

through a partial allocation to equity-linked products. Regardless of the product you choose,

the key is to just start the process by planning, saving and investing systematically for

retirement.

Soon, open your NPS account online, pay subscriptions too

The Pension Fund Regulatory and Development Authority expects a deluge of new

subscribers after a Union Budget sop that allowed extra tax deduction for investments in NPS

Livemint

New subscribers will soon be able to open their accounts with the National Pension System

(NPS) online.

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The Pension Fund Regulatory and Development Authority (PFRDA), which is expecting a

deluge of new subscribers after a Union budget sop that allowed extra tax deduction for

investments in NPS, is planning to roll out this facility in the next few months.

Finance minister Arun Jaitley had proposed to provide a deduction of up to Rs.50,000 over

and above the savings limit of Rs.1.5 lakh for contributions made to NPS, as part of the

government’s efforts to encourage old-age savings and pension through NPS.

“We are looking at the option of online membership. Customers can access the CRA (Central

Recordkeeping Agency) website for all the necessary information and then log in and open an

account. They can also pay their subscriptions online,” said R.V. Verma, member, PFRDA.

“The problem of KYC (know your customer) can be addressed by linking it with Aadhaar. E-

KYC using Aadhaar is an acceptable proof,” he said.

E-KYC service provided by the Unique Identification Authority of India (UIDAI) has been

recognized as a valid document by the government for all financial services under the

Prevention of Money-laundering Rules. All the subscribers have to do is authorize UIDAI to

verify their identity and address to the financial institution.

“We are in the last leg. We should be able to offer this facility to subscribers before the end of

this calendar year,” said Verma.

At present, subscribers have to go to a bank or any other agency designated as a point of

presence by PFRDA. With more than 800 million of the country’s population having Aadhaar

coverage, PFRDA is hopeful that a majority of the subscribers can open NPS accounts

without visiting any agency.

It could also give NPS the much-desired push. Since its launch in May 2009, NPS has been at

a disadvantage vis-à-vis other competing savings schemes such as the Employees’ Provident

Fund (EPF) and Public Provident Fund (PPF) because of the tax treatment of the final

maturity corpus. While the NPS corpus is taxable on maturity, proceeds from EPF and PPF

funds are tax-free.

Though NPS has more than 8.7 million subscribers with total assets under management of at

least Rs.80,800 crore, the majority of subscribers are central and state government

employees for whom it is mandatory to invest in the scheme.

Suresh Sadagopan, a Mumbai-based financial planner, said the option of opening an account

online is a subscriber-friendly and well-timed move.

“NPS is a good product, the tax treatment of the final maturity amount being the only big

disadvantage. Though the sop announced in the Union budget is not enough to nullify the

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disadvantage compared with similar products, we should see more people investing in the

scheme this year,” he said.

Initial distribution charge of NPS up marginally

This slight increase in initial distribution charge will hardly have an impact on your money

Livemint, 04.05.2015

The Pension Fund Regulatory and Development Authority (PFRDA) has marginally increased

the distribution charges for National Pension System (NPS) for the private sector.

WHAT ARE THE CHARGES IN NPS?

NPS is a low-cost market-linked product that allows you to periodically invest in the funds of

your choice—equity, corporate bond and government securities funds. Equity exposure is

currently capped at 50%. It is a pure defined contribution product, wherein you can begin with

a minimum annual contribution of Rs.6,000 and your money gets locked in till you turn 60.

Early withdrawals are discouraged by mandating you to annuitize at least 80% of that money.

Annuity is a pension product that pays a periodic income, although PFRDA is working on rules

to allow for partial withdrawal. At 60, you need to buy an annuity with at least 40% of the

proceeds. The remaining can be taken as lump sum.

The retirement account has 4 costs: central record-keeping charges, point of presence (PoP)

charges, custodian charges, and pension fund management charges. Pension fund

management, or fund management charge, is an annual fee paid to the fund managers for

managing your money. Currently this charge is 0.01% of the fund value, however, this is

under review. The central record-keeping agency (CRA) functions like a repository as it

captures your data and issues a permanent retirement account number (PRAN). For issuing

PRAN, the CRA deducts a one-time charge of Rs.50 from the fund value. Subsequently, it will

deduct Rs.190 annually for maintenance of your account and Rs.4 per transaction. These

charges are deducted from the fund value. There is also a custodian charge of 0.0075% a

year of the asset value held with the custodian. Stock Holding Corp. of India Ltd is the

custodian responsible for holding assets of the NPS. Let’s now take a look at charges you pay

to the PoP.

CHANGES IN THE DISTRIBUTION CHARGES

When you open your retirement account, the distributor or the PoP, gets initial subscriber

registrations charge. Earlier this charge was Rs.100, but in order to ensure better penetration

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of the NPS through enhanced participation of PoPs, PFRDA, in a circular dated 20 April,

increased the initial subscriber registration charge for corporate and all citizens model from

Rs.100 to Rs.125. The charge for any subsequent transaction is 0.25% of the amount

received from the NPS subscriber, subject to a minimum of Rs.20 and maximum of

Rs.25,000. Non-financial transactions or those that do not involve a contribution from the

subscriber will cost Rs.20 per transaction. The marginal increase in charge is applicable once

the PoP gets registered as per the new PoP regulations. Existing PoPs, which have so far

functioned under the interim rules, will have to register again under the new rules before 5

June.

This slight increase in initial distribution charge will hardly have any impact on your money.

What you need to watch for is any increase in the pension fund management charge, which is

under review.

Under National Pension System, corporate bond funds outshine

equities

ET Bureau Apr 30, 2015

MUMBAI: Corporate bond funds of the National Pension System (NPS) outperformed its

equity funds in the past five years. While the equity funds of NPS clocked an average return of

10.6% in the past five years, corporate debt funds delivered 11%.

The third NPS category of gilt funds yielded average returns of 9.8% over the same period.

The only exception is the ICICI Prudential Pension Fund that's part of the NPS, where the

equity fund has consistently done better than the corporate bond and gilt funds.

Though the corporate bond funds of other pension fund managers have not outperformed

equity schemes in the short and medium term, they still managed to deliver good returns in

the past one year. While equity plans benefited from the stock market rally after the 2014

elections, corporate bond funds benefited from interest rate cuts this year. The average return

in the past one year exceeds 15% (see table).

The outperformance of corporate debt funds in the long term, albeit marginal, runs contrary to

the expectations that equity funds outperform over longer periods. Under NPS, investors can

choose their allocation to equity funds, corporate bond funds and gilt funds. The only

restriction is that the exposure to equity funds is capped at 50%. With safer corporate debt

plans outperforming riskier equity funds, some NPS investors who were bullish on stocks may

now review their allocation.

However, experts argued that this outperformance was an exception. "Historically, it has been

proven that equities are able to generate much better returns," said Balram Bhagat, CEO, UTI

Pension Bulletin

May, 2015

18

Retirement Solutions. "Retirement planning is a very long-term process, which necessitates

having a healthy equity exposure."

He pointed out that since its inception in May 2009; the equity plans of the NPS have

outperformed the other two fund options.

"The underperformance of equity plans was probably a result of higher stock market volatility

during the past five years," said Sumit Shukla, CEO, HDFC Pension Fund. "Even though

corporate bonds will continue to perform well, they will not always beat the equity plans."

Pension Bulletin

May 2015

19

Macroeconomic Developments

UN raises projections for India's growth

The Mid-Year Update to the World Economic Situation and Prospects 2015 released he UN

has raised its projections for the Indian economy's growth by 1.7 percent to 7.6 percent in the

year 2015 and by 1.4 percent to 7.7 percent in 2016 from the estimates of 5.9 percent and 6.3

respectively which it made in January 2015

Inflation

CPI Inflation rates, Base Year 2012=100, (on point to point basis i.e. April, 2015 over April

2014), based on General Indices stands at 4.87 per cent against 5.25 per cent in March 2015

and Consumer Food Price Index (CFPI) stands at 5.11 per cent against 6.14 per cent in

March 2015.

The annual rate of inflation, based on monthly WPI, stood at -2.65% (provisional) for the

month of April, 2015 (over April, 2014) as compared to -2.33% (provisional) for March 2015.

Index of Industrial Production

The General Index for the month of March 2015 is 2.1% higher as compared to the level in the

month of March 2014. The cumulative growth for the period April-March 2014-15 over the

corresponding period of the previous year stands at 2.8%.

The Indices of Industrial Production for the Mining, Manufacturing and Electricity sectors for

the month of March 2015 grew at 0.9%, 2.2% and 2.0%, respectively, as compared to March

2014.

Pension Bulletin

May, 2015

20

Financial Markets Developments

Money Market

During the April 2015, banks had borrowed an amount of Rs 2281 bn from the RBI under the

daily LAF repo auctions. On the other hand, RBI absorbed an amount of Rs. 4961 bn under

the daily LAF reverse repo auctions. Upto May 20, 2015, the banks borrowed 1986 bn from

RBI and RBI absorbed Rs. 1020 bn under daily LAF auctions.

During the month of May 2015, call rate hovered in between 4.50 % and 8.50% and CBLO

rate hovered in between 5.50% and 8.65%.

G Sec Market

G-Sec market witnessed subdued momentum for the month. The 10 year benchmark (GS

CG2024 8.40%) yield moved northward from 7.72% on April 06, 2015 and touched a low of

7.76% on April 22, 2015 and ended the month at 7.83% as against 7.74% in the previous

month. On May 20, 2015 the yield closed at 7.86%.

Foreign Currency Market

Weak stock market, dollar demand from oil importers and RBIs view that the currency is

overvalued kept the Rupee under pressure. USD/INR currency pair on April 30, 2015

closed at 63.42. It closed at 63.82 on May 20, 2015 after losing strength in the first fortnight of

May 2015.

Pension Bulletin

May 2015

21

Macroeconomic Statistics

Indicators Units As on 31st

March 2015

As on 30th

April 2015

Absolute

Change

Percentage

Change

1 2 3 4 5=Col 4-

Col 3

6= {Col 5/ Col

3 }*100

S&P BSE Sensex - 27957 27011 -946 -3.38

CNX Nifty - 8491 8182 -309 -3.64

Rs/$ 62.49 63.42 0.93 1.49

Gold $/Ounce 1183 1182 -1 -0.08

Crude Oil (NYMEX) $/Barrel 47.60 60.71 13.11 27.54

Whole Price Index

ON BASE 2004-05=100

-

176.1 176.0

-0.1

-2.65(y-o-y)

Consumer Price Index

ON BASE 2012=100

-

120.1 121.6 1.5 4.87 (y-o-y)

Index of Industrial

Production*

ON BASE 2004-05=100

-

181.3 197.3 16.0 2.1 (y-o-y)

10 year G-Sec Yield/Price

p.a.

Rs.

7.74%

104.32

7.83%

103.65

9bps

-0.67

Foreign Exchnage

Reserve

USD in

bn 343.006

351.869 (as

on 1st May

2015)

8.863 2.51

Net FPI/FII(Equity) (Rs

crore)

Rs

Crore 12078 11721 -357 - 2.96

Net FPI/FII (Debt) Rs

Crore 8645 3612 -5033 - 58.21

Net FII (Total) Rs

Crore 20723 15333 -5390 - 26.01

FDI Equity Inflows^ Rs

Crore 27880 20397 -7483 - 26.84

* Figures are for February 2015 and March 2015 ^ Figures are for January 2015 & February 2015

Pension Bulletin

May, 2015

22

NPS Statistics

NPS – Progress

Sector Total No. of Institutions/Nodal Offices as on 30.04.2015

No. of Subscribers

Contribution

AUM

(Rs. crore) (Rs. crore)

PrAO/DTA/CHO/POP/NLOO

PAO/DTO/CBO/POP-SP/NLAO

DDO/NLCC

Cumulative till end of month i.e. 30.04.2015

Cumulative till end of month i.e. 30.04.2015

As on 30.04.2015

Central Government 620 3,967 17,944 1,523,853

28,077.78

37,277.68

- o/w CABs 491 1,166 3,560 122,493

3,811.59

4,700.71

State Government 178 3,437 201,437 2,652,155

32,051.27

38,498.86

- o/w SABs 135 1,879 8,358 401,988

2,142.98

2,549.89

Corporate Sector 1,660 1,691 120 379,600

5,340.96

5,843.34

UoS 65 38,355 0 88,553

517.34

604.44

NPS Lite/Swavalamban 82 1,006 110,622 4,463,185

1,472.01

1,692.80

Note: The Data is as on last day of the month

The AUM shown in the sheet does not include the AUM of residual and inter-sector shifting subscribers.

The contribution uploaded by Nodal Offices and matched booked in CRA system has been considered

Pension Bulletin

May 2015

23

Asset Under Management – PSU Fund Managers

(As on 30th April 2015)

(In Rs. Crore)

Pension Fund Managers→ SBI UTI LIC

Schemes↓ Fund

invested Fund value

Fund invested

Fund value

Fund invested

Fund value

CG

10,027

13,664

9,291

12,380

8,683

11,233

SG

10,821

13,065

10,718

12,844

10,558

12,745

TOTAL (CG+SG)

20,849

26,729

20,009

25,224

19,240

23,978

Corporate-CG

3,327

3,825

(6)

-

366

421

TIER I

E

269

364

25

34

45

51

C

228

277

19

24

30

34

G

446

545

29

35

24

27

Total

942

1,186

73

93

99

111

TIER II

E

13

18

3

5

0

0

C

13

16

3

3

0

0

G

13

16

3

4

0

0

Total

39

50

9

12

0

0

TIER I + TIER II

981

1,236

82

105

99

112

NPS LITE

587

699

395

477

402

490

TOTAL (Pvt. Sector)

4,895

5,761

471

582

866

1,022

GRAND TOTAL

25,744

32,490

20,480

25,806

20,107

25,001

Pension Bulletin

May, 2015

24

Asset Under Management – Private Fund Managers

(As on 30th April 2015)

(In Rs. Crore)

Pension Fund Managers→ KOTAK RELIANCE ICICI HDFC

Schemes↓ Fund

invested Fund value

Fund invested

Fund value

Fund invested

Fund value

Fund invest

ed Fund value

CG - - - - -

-

-

-

SG - - - - -

-

-

-

TOTAL (CG+SG) - - - -

-

-

-

-

Corporate-CG - - - - -

-

-

-

TIER I

E 21.09 26.67

19.32

25.51

104.69

130.90

20.48

21.12

C 18.19 21.42

15.28

18.51

82.33

96.90

15.29

16.27

G 23.69 27.80

21.01

25.30

92.84

108.67

17.37

18.68

Total 62.97 75.89

55.61

69.32

279.85

336.47

53.15

56.07

TIER II

E 2.04 2.65

2.17

3.11

11.21

14.14

0.70

0.70

C 1.49 1.83

1.73

2.18

11.54

14.42

1.21

1.22

G 1.65 1.97

2.70

3.29

8.76

10.72

0.37

0.39

Total 5.19 6.44

6.60

8.58

31.51

39.27

2.28

2.32

TIER I + TIER II 68.15 82.33

62.20

77.90

311.37

375.74

55.43

58.39

NPS LITE 21.65 26.55 - - -

-

-

-

TOTAL (Pvt. Sector) 89.81 108.88

62.20

77.90

311.37

375.74

55.43

58.39

GRAND TOTAL 89.81 108.88

62.20

77.90

311.37

375.74

55.43

58.39

Pension Bulletin

May 2015

25

Total AUM

(As on 30th April 2015)

(In Rs. Crore)

Pension Fund Managers→

Schemes↓ Total fund invested

Total fund value

CG 28,000 37,278

SG 32,098 38,653

TOTAL (CG+SG) 60,098 75,931

Corporate-CG 3,687 4,246

TIER I

E 504 653

C 408 487

G 653 788

Total 1,565 1,928

TIER II

E 32 43

C 32 39

G 30 37

Total 94 119

TIER I + TIER II 1,659 2,047

NPS LITE 1,405 1,693

TOTAL (Pvt. Sector) 6,751 7,986

GRAND TOTAL 66,849 83,917

As on 31 Mar. 2015 = 63,580 80,855

AUM increased in Apr. 2015 over

Mar. 2015 =

3,270 3,062

Pension Bulletin

May, 2015

26

Net Asset Value

Pension Fund Managers→ SBI UTI LIC

Schemes↓ 31.03.15 30.04.15 31.03.15 30.04.15 31.03.15 30.04.15

CG 20.43 20.38 19.74 19.70 19.98 19.95

SG 17.54 17.50 17.62 17.58 17.86 17.82

Corporate-CG 12.99 12.96 10.00 10.00 13.14 13.11

TIER I

E 18.18 17.53 20.87 20.11 14.38 13.87

C 19.13 19.20 17.33 17.39 12.39 12.44

G 17.88 17.86 16.37 16.35 12.76 12.75

TIER II

E 16.78 16.17 17.02 16.40 12.00 11.63

C 17.57 17.61 16.64 16.69 11.71 11.74

G 17.08 17.06 16.71 16.69 12.84 12.81

NPS LITE 16.55 16.50 16.44 16.39 16.43 16.39

Pension Fund Managers→ KOTAK RELIANCE ICICI HDFC

Schemes↓ 31.03.15 30.04.15 31.03.15 30.04.15 31.03.15 30.04.15 31.03.15 30.04.15

CG 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

SG 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Corporate-CG 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

TIER I

E 19.63 18.92 20.21 19.48 21.49 20.71 15.43 14.88

C 18.83 18.92 17.07 17.17 18.84 19.04 12.33 12.39

G 16.43 16.41 16.11 16.09 16.66 16.64 12.38 12.36

TIER II

E 17.38 16.77 17.24 16.62 16.93 16.32 13.25 12.77

C 16.33 16.40 15.95 16.04 17.62 17.78 11.62 11.68

G 15.45 15.44 15.64 15.63 15.97 15.95 12.65 12.63

NPS LITE 14.46 14.43 0.00 0.00 0.00 0.00 0.00 0.00

Pension Bulletin

May 2015

27

Data on Exit / Withdrawal

(As on 30th April 2015)

PAO Type

Withdrawal

Type

Request

Received

Under

Process at

CRA

Request

Rejected

Request

On Hold

Request

Accepted

Completely

Settled

Partially

Settled

A B C E F G H I

Death 766 2 143 417 204 188 0

Premature 2473 5 63 987 1418 218 1125

Superannuation 1246 3 6 269 968 519 372

Death 1369 8 25 774 562 523 0

Premature 254 1 17 110 126 29 94

Superannuation 3536 4 12 866 2654 2053 513

Death 88 0 2 37 49 47 0

Premature 125 0 1 44 80 7 64

Superannuation 432 1 2 196 233 169 27

Death 140 1 0 40 99 87 0

Premature 222 1 3 68 150 12 126

Superannuation 444 0 2 27 415 116 277

Death 1168 1 8 577 582 542 0

Premature 123 2 3 62 56 0 11

Superannuation 633 4 8 355 266 178 5

Total 13019 33 295 4829 7862 4688 2614

Corporate

Central

Government

State Government

UOS

NPS

Lite/Swavalamban

Note: 1 Withdrawal request includes superannuation, pre-mature exit and death

2 Request rejecetd are the cases where Subscribers wants to continue the PRAN, the cases where the Nodal Office pays Family pension/Disability pension to the family member of the deceased subscriber or incorrect form has been submittd by the subscriber/Nodal Office.

3 On hold requests are due to the discrepancies observed in the Withdrawal request including the 'Request cum Undertaking form'for complete Withdrawal

4 Request Accepted cases are the cases where all the required documents have been received

5 Completely settled cases are where 100% has been paid to the subscriber / claimant

6 Partial Withdrawal cases are where lump-sum withdrawal (20%/60%) has been processed. For rest, subscriber has to purchase annuity or if eligible, can submit 'request cum undertaking' for complete withdrawal.

7 Under Process at CRA are the cases where CRA has received the withdrawal form and pending for action.