NPS Scheme: With an aim to attract more foreign investment, the Pension Fund Regulatory and Development Authority (PFRDA) has allowed pension fund managers to charge more from the next financial year 2021-22 beginning from 1st April 2021. The PFRDA spokesperson informed about the PFRDA move and said that the pension regulator has allowed fund managers to charge more than existing 0.01 per cent as the PFRDA has removed the 0.01 per cent cap on AUM (Asset Under Management) charges. He said that the PFRDA move will also help fund houses to turn profitable.
“With the hike in fees, most PFMs will turn profitable. The old cap of 0.01 per cent of assets under management (AUM) on fees forced PFMs to operate with extremely low costs. The new cap will allow most to turn profitable,” the PFRDA spokesperson said.
NPS charges slab
The PFRDA Spokesperson said that the maximum cap has been set at 0.09 per cent for AUM up to Rs 10,000 crore. PFMs with AUM from Rs 10,001 crore to Rs 50,000 crore will be allowed to charge fees up to 0.06 per cent. Those with AUM from Rs 50,001 crore to Rs 150,000 crore will be allowed to charge fees up to 0.05 per cent. Finally, PFMs with AUM above Rs 150,000 crore will be allowed to charge a maximum fee of 0.03 per cent.
Highlighting the benefit for the pension fund after this PFRDA move; Manikaran Singhal, Founder at goodmoneying.com said, “This PFRDA move may invite interest from foreign players, especially with the new raised FDI cap in pension. According to the RFP issued on 23 December, PFM fee caps will be set on a graded basis linked to the assets managed by the PFM with the cap reducing for higher levels of assets.”
Cautions while opening NPS account
On how the PFRDA move will impact NPS account holders, Singhal said, “From 1st April 2021, NPS account holders will have to fish out more money for their pension managers’ charges. However, they can contain these charges by choosing their fund houses, which have higher AUM.” Singhal advised NPS account openers to choose their fund house from HDFC, UTI, SBI, etc that have higher AUM. He said that higher AUM would mean lower AUM charges for the NPS account holders from 1st April 2021.