Asset managers to invest govt PF, pension funds

Employees of central and 10 state governments, who joined service after January 2004, will get the feel of investing in mutual fund-like services, even if they do not directly invest in schemes by fund houses.

This follows the government decision to soon appoint three Asset Management Companies to manage the pension and provident fund accounts. The government employees can also monitor their pension and provident accounts on a daily basis through the internet.

The fund managers of the three asset management companies will invest in a mix of debt and equity as stipulated by the Pension Fund Regulatory Development Authority (PFRDA).

Around five lakh employees have joined the state and central government service after January 2004.

Employees will be allotted units based on his/her contribution and the employers' contribution to the fund. The fund managers will also declare the net asset value of corpus as well as that of the corpus of each employee.

When an employee retires, he/she will get a part of the fund in his/her account with accumulated returns as provident fund.

The rest of the fund in his/her account will be invested in annuity schemes of insurance companies. Retired employees will get monthly pensions.

All these accounts of employees will be maintained by the premier depository National Securities Depository Ltd (NSDL).

The NAV and other details will be communicated by NSDL periodically. All these details will be available to employees on the internet too.

Some state governments are also in the process of adopting this PFRDA model of pension for their employees. States can also appoint NSDL for the purpose of maintaining the accounts.

"Fees payable to NSDL and details of who will bear the expenses for account keeping will be declared by the authority very soon," said C B Bhave, chairman and MD of NSDL.

Once the project succeeds, even private and non-government provident fund managers may adopt this mechanism.