LIC Pension Fund has emerged the best performer among fund managers who manage retirement funds of government employees under the New Pension Scheme (NPS).
As a result of its performance, LICPF has received the highest allocation among the three fund managers, which include SBI Pension Fund and UTI Retirement Solutions. LICPF has generated returns of 10.19% while the other two fund managers have generated lesser returns.
Speaking to ET, LIC Pension Fund MD H Sadhak confirmed that the subsidiary of Life Insurance Corporation has been allocated 35% of the retirement funds of central government employees. The allocation for SBI Pension Fund and UTI Retirement Solutions was understood to be around 32%. The government-created NPS Trust decides how much funds to allocate to each fund manager based on their performance.
Interestingly, this is the first time that LICPF has outperformed its peers. The central government had introduced the new pension system with effect from January 2004 and selected the three fund managers to manage NPS funds. These fund managers started investment operations in April 2008. For the first year, i.e. 2008-09, allocation was made on the basis of fund management fees quoted by these three fund
managers. However, in the subsequent years, allocation by NPS Trust was based on fund management performance.
In 2008-09, the first year when funds were allocated following aggressive bidding by its peers in terms of fund management charges, LIC Pension Fund got the lowest allocation of 5%. In 2009-10, LICPF got an allocation of 29% following an improved performance.
Many state governments also joined NPS and usually they follow the allocation pattern of central government funds. It is expected that assets under management of LIC Pension Funds will increase very substantially during the current year.
Although NPS has not divulged the numbers, assets under management under NPS for government employees is expected to be around Rs 4,500 crore. SBI Pension Fund manages the bulk of the funds in excess of Rs 2,000 crore followed by UTI Retirement Solutions and LICPF.
Close to half of the funds are invested in government securities and less than 15% is invested in equity. The rest are allowed to be invested in top-rated debt.