New Delhi, Nov 27 (UNI) The Pension Fund Regulatory and Development Authority (PFRDA) and National Securities Depository Limited (NSDL) today announced entering into a formal agreement for setting up of a Central Recordkeeping Agency (CRA) for the New Pension System (NPS).
The NPS was introduced by the Union Government for its new recruits, excepting the Armed Forces, with respect from January 1, 2004.
The agreement was signed yesterday.
Addrssing a Press Conference here, PFDRA Chairman D Swarup said the CRA was the first of its kind venture in India and was critical to the successful operationalisation of the NPS.
Mr C B Bhave, Chairman and Managing Director, National Securities Depository Ltd, also spoke on the occasion.
The main functions and responsibilities of the CRA include: (i) Recordkeeping, Administration and customer service functions for all subscribers of the NPS; (ii) Issue of unique Permanent Retirement Account Number (PRAN) to each subscriber, maintaining a database of all PRANs issued and recording transactions relating to each subscriber's PRAN; (iii) Acting as an operational interface between PFRDA and other NPS intermediaries such as Pension Funds, Annuity Service Providers and Trustee Bank.
Mr Swarup said the important feature of the PRAN to be issued by CRA is that it will be portable across jobs and geographical locations.
He said as per the agreement entered into between PFRDA and NSDL, the building up of CRA operations will be complete in six months.
Accordingly, CRA operations are expected to commence in respect of Central Government employees with effect from June 1,2008.
It will also be open to State Governments and Union Territories to participate in this facility.
NSDL's appointment as CRA is for ten years against payment of an annual fee of Rs ten lakhs.
In terms of the agreement entered into, NSDL will be charging a volume driven and highly competitive fee for rendering CRA services to the subscribers of the NPS.
The Annual Maintenance Charges and Transaction Charges payable per subscriber shall be Rs. 350 and Rs 10 respectively (till such time as the number of accounts with the CRA reaches ten lakh); Rs 280 and Rs 6 respectively (on the threshold limit of ten lakh accounts being reached) and Rs 250 and Rs 4 respectively once the number of accounts with the CRA reaches 30 lakhs.
In addition, NSDL will charge a fee of Rs 50 per account as account opening charges.
Mr Swarup said the Central Government have decided to bear these charges in respect of their employees covered under the NPS.
He said the PFRDA have also appointed, through a process of competitive bidding, State Bank of India (SBI), UTI Asset Management Company (UTI-AMC) and Life Insurance Corporation (LIC) as Pension Fund sponsors under the NPS.
LIC have already incorporated their Pension Fund and SBI and UTI AMC are expected to complete the process by December 15, 2007.
Mr Swarup said once the NPS architecture becomes fully operational, the NPS corpus of Central Government employees will be distributed among the three Pension Funds based on the initial investment management fee and transaction based charges quoted by these entities.
Mr Swarup said the three entities will be performing the investment management functions for a fee varying from three to five basis points. The appointment of the Pension Funds shall be for a period of three years.
The arrangements relating to distribution of NPS corpus will, however, be reviewed at the end of each year based on the returns on investment generated by each Pension Fund Manager (PFM) and the investment management fee quoted, Mr Swarup said.
At the initial stages, there will be two Investments options available under the NPS. The subscribers will have the option of having their pension contributions either invested fully in Government bonds and securities or in accordance with the investment guidelines for non-Government Provident Funds issued by the Union government of India as per the notification issued on January 24, 2005.
The notification allows investment of funds upto 5 per cent into equity and another 10 per cent in equity linked mutual funds.