India’s low-cost market linked pension product – NPS just got a bit expensive for investors.
PFRDA has revised the fee structure for pension fund managers starting from the financial year 2021-22. With this, pension fund managers can now charge management fees of up to 0.09% of assets. So far, pension fund managers were allowed to management fees of up to 0.01% of AUM.
The pension fund regulator has introduced slab-based management fee model for pension fund managers. Now, pension fund managers managing up to Rs.10,000 crore of AUM can charge a maximum of 0.09% of assets. The management fee declines with the increase in size of the fund.
Since all pension funds offering Tier 1 and Tier 2 NPS accounts have assets of less than Rs.10,000 crore, they can increase their management fees from 0.01% to 0.09%.
Here is the slab based management fees
|
Slabs of AUM managed by the Pension Fund |
Maximum Investment Management Fee (IMF) |
|
Upto 10,000 crore |
0.09% |
|
10,001 – 50,000 crore |
0.06% |
|
50,001 – 1,50,000 crore |
0.05% |
|
Above 1,50,000 crore |
0.03% |
PFRDA will review this rate every 5 years.
Currently, there are 7 pension fund managers in the country - ICICI Prudential Pension Funds Management, LIC Pension Fund, Kotak Mahindra Pension Fund, SBI Pension Fund, UTI Retirement Solutions, HDFC Pension Management, and Birla Sun Life Pension Management.
As on February 2021, the NPS industry manages assets of Rs.5.59 lakh crore and has over 4 crore subscribers.