INDIA - India's finance ministry is pushing public sector banks to adopt a new defined contribution pension scheme, known as the NPS, for fresh recruits which could potentially prove rich pickings for fund managers.
The country is pushing forward with reforms to impose a new nationwide defined contribution pension plan for employees rather than rely on the existing state-funded final salary scheme.
Banks have received a note from the ministry to implement the scheme for the new recruits as soon as possible. Although parliament has yet to rubber stamp the Pension Fund Regulatory and Development Authority Bill that would make the comprehensive DC arrangements law, pension fund managers have been lined up ready to manage funds for new bank employees and those that have already signed up.
The NPS has been mandatory for all government employees since 1 January, 2004.
The money has been lying idle with the government forced to pay interest of up to 8% to the DC members. State-owned banks recruit around 2,500 employees annually, especially for IT-related areas. Both HSBC and Principal, a US-based asset manager, have expressed interest in managing funds.
“India has a potential 250 million participants capable of creating US$100bn assets by 2015,” said Norman Sorensen, senior vice pre-sident at Principal Financial Group. “But growth depends on implementation.”
“Under the NPS, fund managers will offer an array of schemes offering differing risk-return profiles, with at least one fully invested in government securities,” said Ruchita Manghnani a researcher at the Center for Policy Research in New Delhi. “There will be plenty of opportunities for fund managers: For overseas firms and domestic players.”
Trade unions are trying to resist the move from DB to DC which could stall changes. Under the NPS each employee (and their employer in the case of government servants appointed since 2004) contributes a proportion of their monthly income to an individual account.
Mark Evans has been appointed as a director at Independent Trustee Services (ITS) to lead trustee appointments in London.
The Pension Protection Fund (PPF) is consulting on changes to the actuarial assumptions it uses in valuations in a bid to better reflect the bulk annuity market, with schemes set to move into surplus on aggregate.
Private sector defined benefit (DB) schemes were 96.3% funded on a Pension Protection Fund (PPF) compensation basis at the end of July, according to the lifeboat fund's monthly index.
Conduent has completed the sale of its actuarial and human resource consulting business to private equity investor, H.I.G. Capital.