PFRDA allows banks to set up pension funds for NPS, revises investment management fee structure

PFRDA has decided to allow Scheduled Commercial Banks (SCBs) to independently set up pension funds to manage NPS. The regulator has also revised the investment management fee structure.

Announcing a series of policy reforms aimed at strengthening the National Pension System (NPS) on Thursday, the Pension Fund Regulatory and Development Authority (PFRDA) said that this will enhance competition and safeguard subscribers’ interests.

“The proposed framework seeks to address existing regulatory constraints that had limited bank participation till now, while introducing clearly defined eligibility criteria based on net worth, market capitalisation and prudential soundness in line with RBI norms, to ensure that only well-capitalised and systemically robust banks are permitted to sponsor Pension Funds,” the PFRDA said in a release on January 1.

Currently, 10 pension funds are registered with the PFRDA. The detailed criteria for pension funds under the new framework will be notified, and will apply to both new and existing funds, the regulator said.

New trustees

As part of policy reforms to enable sustainable growth of NPS, the PFRDA has appointed three new trustees on the NPS Trust Board:

• Dinesh Kumar Khara, Former Chairman, State Bank of India
• Swati Anil Kulkarni, Former Executive Vice President, UTI AMC
• Arvind Gupta, Co-Founder and Head, Digital India Foundation and Member of the National Venture Capital Investment Committee under the Fund of Funds Scheme managed by SIDBI

Dinesh Khara has also been designated as the Chairperson of the NPS Trust Board.

Revised fee structure

The PFRDA has revised the Investment Management Fee (IMF) structure for pension funds. The new slab-based structure will be implemented on April 1, 2026. The revised structure includes differentiated rates for Government and Non-Government sector subscribers.

“The revised slab-based IMF introduces differentiated rates for Government and Non-Government sector subscribers and shall also apply to schemes under the Multiple Scheme Framework (MSF), with MSF corpus being counted separately. The IMF for Government Sector employees under the Composite Scheme or those opting for Auto Choices and Active Choice G 100s remain the same,” the PFRDA said.

Here are the rates for the non-government sector:

The annual regulatory fee (ARF) payable by pension funds to PFRDA remains unchanged at 0.015%, out of which 0.0025% AUM will be passed on to the Association of NPS Intermediaries (ANI) to support coordinated awareness, outreach and financial literacy Initiatives, the PFRDA said.

The PFRDA expects these reforms to help subscribers and stakeholders access a more competitive, well-governed and resilient NPS ecosystem and lead to enhanced long-term retirement outcomes and old-age income security, it added.