National Payment System: Your NPS returns have increased! But these fund managers are not happy; here's why

National Payment System: Your NPS returns may be increasing but the people managing the money may not be as happy. With per annum investment fees for NPS at a meagre 0.01% of assets managed, the private sector pension fund managers continued to report losses during the financial year 2018 (FY18). Of the four private sector pension fund managers for NPS, while two marginally narrowed losses, finances of the other two worsened.

HDFC Pension Management reported a loss after tax of Rs 12.09 lakh in FY18 as compared to Rs 30.59 lakh loss in FY17. Kotak Mahindra Pension Fund also narrowed its loss from Rs 21.5 lakh in FY17 to Rs 4.9 lakh in FY18.

However, ICICI Prudential Pension Funds Management’s loss after tax widened to Rs 66 lakh from Rs 57 lakh in FY17. Aditya Birla Sun Life Pension Management, which had disclosed a profit of Rs 21 lakh in FY17, swung into a loss of Rs 1.26 crore last fiscal.

“It is true that the investment fee is very low. We have been pressing for a hike and we are hopeful that a decision on this matter will be taken soon by the regulator. Inadequate profit prospects of pension fund managers may compel the parent companies/groups not to give adequate resources. The opportunity for pension fund management is huge and we are bullish about growth,” Sumit Shukla, CEO, HDFC Pension Management told DNA Money.

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Total revenues of the four private-sector pension fund managers, whose FY18 annual reports were available, showed a 4-11% rise, aided by other income.  Pension fund managers get a fee of 0.01% of the corpus they manage. With awareness about NPS (National Pension System) growing thanks to PFRDA’s efforts, one can only hope that private sector pension fund managers would be able to get more fees and turn profitable by the dint of core operating business.

A CEO of a diversified financial services firm said that private sector NPS fund managers are not allowed to manage the money of government sector and that automatically prevents them from managing more money. “There are two issues. One, the government is not allowing private sector NPS fund managers to oversee government employees’ NPS money. Two, they should leave the option open to government staff on who they, as an investor, want to be with.”“You cannot force them to only invest money with a handful. All financial services are based on open architecture,” the CEO said.

Even with private sector funds, assets under management have shown a growth trend. During FY18, HDFC Pension Management registered assets under management (AUM) growth of 120%, with AUM rising to Rs 2,560.30 crore from Rs 1,163 crore in FY17. Kotak Mahindra Pension saw its AUM grow 71.82% to Rs 536.17 crore. In case of ICICI Prudential Pension Funds Management, the subscribers’ funds managed increased to Rs 2,325.51 crore, a 61.3% jump.

“Operating performance did not improve with the growth in assets managed since while the investment management fees increased from Rs 10 lakh to Rs 18 lakh, personnel expenses increased from Rs 1.74 crore to Rs 1.87 crore and brokerage expense increased from Rs 16 lakh to Rs 27 lakh,” said ICICI Prudential Pension Funds Management in its annual report.

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It must be mentioned that the pension fund managers who are allowed to manage government sector money also are much better off. They managed tens of thousands of crores, and hence, even the 0.0102% per annum pension fund charges for government sector rakes in a respectable amount.

For instance, SBI Pension Funds reported a 35% rise in FY18 profit at Rs 1.39 crore. The company closed the fiscal with an AUM of Rs 89,283 crore, representing a growth of 34% over the previous fiscal.