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Sarbajeet K. Sen

New Delhi , Nov. 16

THE management of pension funds after the ongoing pension reforms would be a predominantly private sector show.

Though the Government has finally decided against placing a cap on the overall number of pension fund managers (PFMs) in the new regime, it has stood firm that it will allow only a solitary public sector entity to participate in the market.

In its initial plans, the Government had proposed a cap of six PFMs with one of them being a public sector entity. However, though it has later decided to let more than six players into pension fund management, the cap on sole public sector PFMs would be retained.

"We would have only one public sector PFM whatever be the overall number of such entities," a senior official of the Finance Ministry said. The sole PSU has been tentatively named as Pension Corporation of India (PCI).

Officials said that the reason for not allowing more than one public sector entity was to ensure against any accusation that the Government wants an indirect hand in running the sector.

"The public sector fund manager is meant to provide a safe option to those people, specially the Government officials, who may want to look for safety of funds. Other than that we would like the private sector to run the show," officials said.

The Ministry of Finance has been in talks with financial institutions and banks to finalise the equity structure of the public sector PFM. It is understood that the public sector insurance giant — Life Insurance Corporation (LIC) — is likely to take the lead role in setting up the entity.

According to plans, the Pension Fund Regulatory and Development Authority would be inviting global bid for the private sector PFM slots. All major domestic and international mutual funds and insurance companies are expected to queue up for the first set of licences to be handed over by the regulatory authority.

The Government felt that the pension market is slated to be one of the largest segments in the financial market in the years to come. Though the number of subscribers during the first few years are expected to be small, it is expected that the numbers would swell in the years to come with more and more sectors being allowed to avail of the services of the PFMs.

Thus, while initially the new Government employees would only be allowed to be subscribers it is expected that the existing Government staff would later be let in. Moreover, several State Governments are also expected to participate to reduce their long-term pension payout burden.

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