ING Vysya first off the mark, sets up pension trust

The ING Vysya group has set up ING Vysya Pension Trust, the legal entity overseeing the group's plans to foray into the pension business.

This is the first group to specify its plans even before the pension regulatory board or the regulations have been finalised.

The share capital and shareholding pattern of the entity will be decided after the regulations have been finalised, said Yvo Metzelaar, managing director & chief executive officer, ING Vysya Life Insurance.

"As there is going to be a separate regulator, it is best to set up a separate entity. We are likely to follow the Anglo-Saxon model, whereby all the group arms will be interlinked," Metzelaar told Business Standard.

The entire ING Vysya group "" bank, mutual fund, life insurance company and the investment management arm (ING Vysya Financial Services Ltd) "" will operate under ING Vysya Pension Trust, which if permitted would see ING taking a greater stake in the venture. Currently, regulations cap ING's stake at 26 per cent in the insurance venture, with ING Vysya Bank holding 20 per cent, the GMR Group 48 per cent and the balance six per cent with a private investor.

Other players including corporate houses "" Birlas, Tatas, and Dabur (Aviva) as well as financial conglomerates "" ICICI Bank, State Bank of India, and Kotak Mahindra "" have indicated interest in foraying into the pension industry. However, they have yet to decide on their respective structure in terms of which entity within the group will foray into the new pension business.

Most players are against establishing a separate arm for the pension business, stating that life insurers unlike the mutual fund industry have already invested adequate capital.

Cees Schrauwers, managing director international, Aviva Plc, said should the government decision point to the need for a separate entity with additional capital base, this will drive up the cost of doing pension business in India. "We will need to relook at the arithmetic and see the viability," he added.

Meanwhile, ING Vysya Pension Trust will be the direct link with the customer, and will guarantee the obligation towards the individual pension contract. Under this legal entity, the four functions of marketing (sales & collection), record keeping, investment management and annuity will be overseen by the trust.

The annuity business will be undertaken by the life insurance arm. The marketing, sales and collection of the pension product will be undertaken by the bank, the life insurance outfit, and the financial services arm.

The record keeping function will be maintained by both the insurance and mutual fund outfits, and the investment management will be looked after inhouse by ING Investment Management, which is part of ING MF.

Commenting on the need for additional capital for a pension outfit, Metzelaar said, "Imposing capital limits will help build barriers for entry." The mutual fund industry, unlike life insurance companies, have not put in capital.