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National Pension System may undergo major overhaul

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8 years ago

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National Pension System may undergo major overhaul

New Delhi: The National Pension System (NPS) could be in for a major overhaul.
A committee set up to review investment guidelines for the NPS has recommended not only a shift in the investment strategy from passive to active fund management, but also proposed relaxing investment norms for pension funds and giving investors the freedom to decide the assets they want to put their money in and how much they want to invest.
The committee under G.N. Bajpai, former chairman of Life Insurance Corporation of India and the Securities and Exchange Board of India (Sebi), was set up by the Pension Fund Regulatory and Development Authority (PFRDA), the sector regulator, in September 2014. It submitted its report on 7 April.
NPS currently follows a “quantitative portfolio regulation” approach toward investments of pension assets. This approach prescribes the limits for investment in certain assets that are perceived by the regulator to be risky. This leads to a system of directed investments in which the regulator prescribes the assets as well as the caps on investment in these assets.
For instance, NPS rules for the private sector allow a maximum exposure to equity of 50% and only through index funds that replicate either the BSE’s Sensex or the National Stock Exchange’s Nifty 50 index. Index funds mimic movements in the index to which they are linked. This form of investment is called passive investment. For government sector employees, equity exposure is limited to 15%.
The report of the Bajpai committee recommends moving from this directed investment regime to one that leaves the choice of investment of pension assets to the subscriber.
“Based on her perception of risk and financial situation in life, the subscriber is expected to exercise the choice, as a prudent investor would,” the report said. In others words, an investor will not only be able to decide the exposure to an asset class but will be given a wider choice.
“The movement from the directed investment regime to the prudent investor regime shall entail not only easing of the ceilings for each asset class, but also allowing wider choice of instruments under each asset class across the board,” said the report.
Allowing a wider choice would lend itself to a system of active management.
“This could mean expanding the universe of instruments under equity from merely mirroring any index to investing in securities with derivatives on the stock exchange and expanding into other capital market instruments (primary and secondary) even further as the market matures, with suitable caveats and ceilings,” the report said.
But keeping costs low under active management of funds can pose a challenge, experts said.
“This is digressing from the original thought process. Active management and low costs don’t go hand-in-hand. Therefore, in order to keep costs low and manage public money, passive fund management is the best option,” said Manoj Nagpal, chief executive officer, Outlook Asia Capital, a wealth management firm.
The committee has also recommended harmonizing investment guidelines for the NPS across the government and the private sector so that both follow the same pattern of investments—a proposal that has been welcomed as positive. This will allow the government NPS scheme a higher exposure to equity of up to 50%.
The report also proposes allowing private fund managers to manage the government’s money pension funds. Currently only public sector pension fund managers are allowed to manage the government NPS funds. Because the private sector NPS is still struggling to gain traction, this restriction makes it difficult for private pension fund managers to sustain fund management at low costs.
“The merger is a very good step as that’s the only way to achieve economies of scale,” said Nagpal. As of 30 April 2015, the total assets under management of NPS stood at Rs.83,917 crore. Of this, only aboutRs.6,448 crore is from the private sector.
Currently the government sector is managed by three fund managers—SBIPension Funds Pvt. Ltd, UTI Retirement Solutions Ltd and LIC Pension Fund Ltd. Contributions are allocated to these three managers in a predefined proportion and they invest the funds in pre-determined proportion: Up to 55% in government securities, up to 40% in debt securities, up to 15% in equity and up to 5% in money market instruments.
In the case of the private sector NPS, there are currently seven public and private fund managers—HDFC Pension Management Co. Ltd, ICICIPrudential Pension Fund Management Co. Ltd, Kotak Mahindra Pension Fund Ltd, LIC Pension Fund, Reliance Capital Pension Fund Ltd, SBI Pension Funds and UTI Retirement Solutions. An eighth fund manager is yet to be incorporated by Birla Sun Life Insurance Co. Ltd. In the private sector, investors can choose from three funds—government securities funds, fixed income instruments other than government securities funds and equity funds in which the investor cannot invest more than 50%.
The report recommends a timeline of six years in which the industry will move to the new regime in a phased manner. In the first phase, the report recommends steps such as merging government and private sector NPS schemes and allowing more play to pension fund managers in equity by allowing investments in shares that have derivatives in any stock exchange and permitting investments in equity both through the primary and secondary markets. The first phase also allows for lifecycle funds with the equity cap at 75%.
Depending on your age, the lifecycle fund automatically invests your money in different asset classes. It starts with a maximum exposure of 50% in the younger days and tapers as one reaches retirement. The report also recommends a switch to active management in the first phase and a limited exposure of 5% in new asset classes such as real estate through real estate investment trusts and alternative investment funds registered with Sebi.
The second phase increases the equity exposure to 75% and the third recommends no ceiling on asset classes but only a negative list of assets and instruments based on the experience of the last five years and some prudential ceilings like concentration ceilings.
The report has recommended bringing all the pension products under the purview of the PFRDA, noting that Sebi and the Insurance Regulatory and Development Authority of India continue to grant approval to such products.
“It would be in order to develop a contiguous pension system involving collection, investment, fund management, record-keeping and pay-outs for orderly growth of the pension sector under the single regulatory umbrella of PFRDA,” it said.
The report also said the fund management fee of 0.01% of the corpus—the industry arrived at this fee through an auction—was too low and recommended a fixed plus variable fee structure.
“The current charges are unsustainable and the recommendation to fix that will make pension fund business economically viable,” said Sumit Shukla, chief executive officer, HDFC Pension Management.
The full report is available at the PFRDA website, www.pfrda.org.in
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News Paper

बीमा पॉलिसी खरीदने के लिए केवाईसी जरूरी, अब क्लेम होगा और अधिक आसान, नहीं होगा कोई फ्रॉड

Published

8 months ago

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March 30, 2023

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Insurance KYC: बीमा नियामक इरडा ने कहा है कि नए बदलाव जीवन बीमा, स्वास्थ्य बीमा (Health Insurance) , वाहन बीमा ( Motor Insurance)और आवास बीमा समेत अन्य बीमा पर पॉलिसी पर भी लागू होंगे।

इरडा ने उपभोक्ताओं को धोखाधड़ी से बचाने और क्लेम को और ज्यादा आसान करने के लिए पॉलिसी खरीदने में केवाईसी दस्तावेज को अनिवार्य कर दिया है। नियामक ने इसके अलावा कई अन्य नियमों में भी बदलाव किया है। बीमा नियामक इरडा ने कहा है कि नए बदलाव जीवन बीमा, स्वास्थ्य बीमा, वाहन बीमा और आवास बीमा समेत अन्य बीमा पर पॉलिसी पर भी लागू होंगे।

बीमा नियामक ने कंपनियों को निर्देश देते हुए कहा है कि बिना केवाईसी दस्तावेजों के किसी भी तरह की पॉलिसी न बेचें। इसके अलावा मौजूदा पॉलिसी में किसी तरह के बदलाव से बचें। मामले से जुड़े सूत्रों का कहना है कि कुछ ग्राहकों ने अपनी बीमा कंपनी और बीमा नियामक से धोखाधड़ी की शिकायतें की हैं।

ठगी बढ़ी तो सख्त हुए नियम

इसके तहत ग्राहकों से टॉपअप कराने, बीमा कवर बढ़ाने समेत कई अन्य फायदों का लालच देकर ठगी करने की कोशिश की गई है। इसके बाद नियामक ने कदम उठाते हुए बीमा पॉलिसी खरीदने के नियमों को सख्त कर दिया है। केवाईसी दस्तावेज में बीमा कंपनी को आधार कार्ड, पैन कार्ड, चुनाव पहचान पत्र, पासपोर्ट, आवास प्रमाण पत्र, रसोई गैस कनेक्शन का बिल या बिजली बिल दे सकते हैं।

मानसिक बीमारी का कवर जरूरी

बीमा नियामक ने एक और अहम कदम उठाते हुए स्वास्थ्य बीमा पॉलिसी से जुड़ी कंपनियों से कहा कि वह हर हाल में स्वास्थ्य बीमा में मानसिक बीमारी का कवर भी जरूर शामिल करें। इसके साथ ही इरडा ने यह भी कहा है कि कंपनियां मानसिक बीमा से जुड़े क्लेम को मना नहीं कर सकती हैं। इसके अलावा नियामक ने ग्राहकों को स्वास्थ्य बीमा पॉलिसी खरीदते समय इस मानसिक बीमा के कवर की गहरी जांच-परख करें।

केवाईसी के फायदे

1. पॉलिसी में बदलाव के नाम पर धोखाधड़ी पर अंकुश लगेगा
2. क्लेम के समय कंपनियां नाम गलत होने का बहाना नहीं कर पाएंगी 3. पॉलिसी फॉर्म में दिए विवरण और केवाईसी में किसी अंतर पर कंपनियां भी जिम्मेदार होंगी

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Government Employees

Modi Government Fixes 8.15% as provident fund Interest Rate For 2022-23

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8 months ago

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March 30, 2023

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In March 2022, EPFO had lowered the interest on EPF for 2021-22 to an over four-decade low of 8.1 per cent for its about five crore subscribers, from 8.5 per cent in 2020-21.

Retirement fund body EPFO (Employees’ Provident Fund Organisation) fixed 8.15 per cent  rate of interest on employees’ provident fund (EPF) deposits for 2022-23 at its meeting today.

In March 2022, EPFO had lowered the interest on EPF for 2021-22 to an over four-decade low of 8.1 per cent for its about five crore subscribers, from 8.5 per cent in 2020-21.

This was the lowest since 1977-78, when the EPF interest rate stood at 8 per cent.

The Employees’ Provident Fund Organisation’s apex decision-making body Central Board of Trustees (CBT) has decided to provide 8.15 per cent rate of interest on EPF for 2022-23 at its meeting on Tuesday, the Ministry of Labour and Employment said.

The 8.5 per cent interest rate on EPF deposits for 2020-21 was decided by CBT in March 2021.

After the CBT’s decision, the interest rate on EPF deposits for 2022-23 will be sent to Ministry of Finance for concurrence.

After the government’s ratification, the interest rate on EPF for 2022-23 will be credited into accounts of over five crore subscribers of EPFO.

EPFO provides the rate of interest only after it is ratified by the government through the finance ministry.

In March 2020, EPFO had lowered the interest rate on provident fund deposits to a seven-year low of 8.5 per cent for 2019-20, from 8.65 per cent provided for 2018-19.

EPFO had provided 8.65 per cent interest rate to its subscribers in 2016-17 and 8.55 per cent in 2017-18. The rate of interest was slightly higher at 8.8 per cent in 2015-16.

The retirement fund body had given 8.75 per cent rate of interest in 2013-14 as well as 2014-15, higher than 8.5 per cent for 2012-13.

The rate of interest was 8.25 per cent in 2011-12. 

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AIR INDIA TO GIVE RS. 98 CRORE WORTH SHARES TO ITS EMPLOYEES, CHECK ELIGIBILITY HERE

Published

10 months ago

on

January 26, 2023

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Tata-owned airline Air India has introduced an employee share benefit scheme, offering around 98 crore shares or 3 per cent of its equity share capital to permanent employees as part of a stock option scheme. The move aimed at incentivising and improve the performance will benefit around 8,000 employees.

“In accordance with the share purchase agreement signed as part of the disinvestment process, Air India has initiated the Employee Share Benefit Scheme for eligible employees who were in service with the airline on the date of privatisation,” Economic Times quoted a company spokesperson as saying.

With this, Air India will become the second company in the salt-to-steel conglomerate to launch such stock option plan for its staff after automobile major Tata Motors, which rolled out a scheme in 2018. Tatas officially took over the erstwhile national carrier from the Centre on January 27, 2022.

Along with Air India staff, permanent employees of Air India and Air India Express at the time of the takeover will also be eligible to participate in the scheme.

Air India Staff Stock Option

Under the scheme, permanent employees will get the share at a price of 27 paise apiece, as per the document sent to the staff. The price is at a discount compared to the book value of 87-90 paise per share at the time of acquisition, PTI quoted a source as saying.

Worth mentioning here is that employees of the carrier will not personally own any of its shares at any point of time, instead, the shares will be held by a trust. SBI Caps Trustee Company Ltd has been appointed to implement the scheme.

The company has authorised the trust to offer ESB benefits on no more than 3 per cent of the shares of the company purchased by Talace i.e., 97,99,56,600 to the eligible employees from time to time, in one or more tranches, acquired by the trust from Talace for nil monetary consideration.

The trust shall hold the ESB shares to provide the ESB benefit to the eligible employees upon the payment of the aggregate exercise price together with all applicable taxes and amounts. Talace, a subsidiary of Tata Sons, acquired Air India, Air India Express and the government’s 50 per cent stake in Air India SATS Airport Services Pvt Ltd.

The fair market value (FMV) will be calculated every year by July 15 and employees will be able to encash their shares.

Any eligible employee retiring on or after January 27, 2022, will be deemed to be an eligible employee and will be entitled to the benefits in accordance with and subject to the terms of this scheme.

ESOP scheme in other airlines

Other Indian airlines and Air India’s competitors like IndiGo and SpiceJet have also implemented ESOP policies. Low-budget airline IndiGo allotted shares to its top management in its early days, making most of them millionaires when it listed on the stock exchanges in 2015 at a price of Rs 765 a share.

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