NPS subscribers can now choose preferred fund managers for 3 asset classes.
As per the Pension Fund Regulatory and Development Authority (PFRDA), subscribers of the National Pension Scheme (NPS) can now choose separate pension managers for three asset classes - equity, government security, and corporate bonds. However, this option is not available for alternative assets.
Previously, subscribers of the National Pension Scheme (NPS) were allowed to select only one pension manager for all the asset classes. However, as per the Pension Fund Regulatory and Development Authority, they can now choose separate pension managers for three asset classes - equity, government security, and corporate bonds. Unfortunately, this option is not available for alternative assets.
Currently, there are 10 pension funds in India. Seven of these are private pension managers - Axis Pension Fund, Aditya Birla Sun Life Pension, HDFC Pension, ICICI Prudential Pension, Kotak Mahindra Pension, Max Life Pension, and Tata Pension Management. The remaining three are government-owned pension managers - LIC Pension, UTI Pension, and SBI Pension Management. Subscribers of the National Pension Scheme (NPS) can change their asset allocation four times in a financial year.
If a subscriber were to choose the best pension manager for each of the asset classes and invest equally in them over a five-year period, they would receive an annualized return of 10.90%. This is higher than what any single pension manager could deliver. However, it’s difficult to predict which pension manager will perform well in the future.
The facility is a commendable initiative for subscribers as it offers investment flexibility. This will also motivate pension fund managers to maintain top-quartile fund performance, thereby enabling subscribers to continue choosing them. Since NPS is a long-term investment, subscribers should allow pension fund managers sufficient time to demonstrate their performance before making any decisions.
In conclusion, the new facility is a welcome initiative for subscribers as it provides investment flexibility and motivates pension fund managers to maintain top-quartile fund performance. Subscribers should allow pension fund managers sufficient time to demonstrate their performance before making any decisions. The long-term nature of NPS investments makes it imperative for subscribers to choose wisely.
