The Pension Fund Regulatory and Development Authority (PFRDA) has chosen SBI, UTI Asset Management Company and LIC as the three best value bidders for managing pension funds under the New Pension System (NPS). IDBI Capital Market Services could not make it to the league.

In May this year, PFRDA had received proposals from Canara Bank, IDBI Capital, LIC, SBI, UTI AMC, Securities Trading Corporation of India and Punjab National Bank. PFRDA had kept the eligibility criteria to five years of experience of fund management and a ceiling of assets under management of not less than Rs 10,000 crore.

These fund managers will manage pension funds of the Central government and 20 state governments under NPS. NPS was made mandatory for government employees, who joined service after January 1 , 2004. Unlike the current defined benefit system, under which a civil servant gets a pension based on his last drawn salary, NPS is based on the contribution of an individual, 10 per cent each from the government and the employee. At present, the corpus under management is to the tune of Rs 2,000 crore.

The pension fund would have two investment options to begin with — a pure debt option where the money would be invested in government securities and an equity option where the exposure to equity would be up to 15 per cent (5 per cent direct equity and 10 per cent through equity-based mutual funds). For now, this money is being kept in a public account, on which the government is giving 8 per cent returns.

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