NPS charges to go up after fresh bids

NEW DELHI: Investors in the National Pension System ( NPS) will be charged more for fund management but experts say the overall costs of the scheme are still quite low. Bids received from the nine pension fund managers range from 0.07% (Rs 70 per Rs 1 lakh) to 0.1% (Rs 100 per Rs 1 lakh). The bids were opened by the Pension Fund Regulatory and Development Authority ( PFRDA) on Wednesday. Till now, investors were being charged only 0.01% (Rs 10 per Rs 1 lakh) because all pension funds had to match the lowest bid by Reliance Capital Pension Fund in the previous round of bidding in April 2014.

In the fresh bids invited by the Pension Fund Regulatory and Development Authority (PFRDA), the regulator had not made it mandatory for pension funds to match the lowest bid. However, it had also lowered the cap on charges from 0.25% to 0.1%. Only two of the nine pension funds have hit the ceiling. “The hike in the fund management charges should not be a deal breaker for investors in the NPS,” says Manoj Nagpal, CEO of Outlook Asia Capital. Nagpal points out that the hike in charges will have a marginal impact on the overall cost for the investor. “If the custodian fees and other fixed charges are taken into account, the overall cost came to roughly 50 basis points. Now it will be around 57-60 basis points,” he says.



The latest bidding has seen two more entrants in the NPS arena, taking the total number of pension fund managers to nine. Birla Sun Life and DSP Blackrock are not exactly new to NPS. Birla Sun Life had qualified in the previous bidding round but did not start operations or even set up a pension fund. DSP Blackrock had set up a pension fund but did not match the lowest bid of 0.01% in 2014. With no compulsion to match the lowest bid, it may now start operations.