UTI Retirement Solutions, a pension arm of UTI AMC, has outperformed two leading fund managers, SBI Pension Fund and Life Insurance corporation fund in the New Pension Scheme (NPS) for government employees.
Industry officials point out that UTI Scheme I for central government employees yielded returns of 12.16 percent, greater than SBI's 11.70 and LIC's 11.88 percent returns. These returns are calculated on the mark-to-market basis which necessitates usage of market prices of instruments in the portfolio.
Since May 1, 2009, the pension fund regulatory, PFRDA has asked companies to report their net asset values (NAVs). Civil servants recruited after 2004 are now eligible for NPS.
The industry estimates reveal that over 6.5 lakh central and state government employees are under the ambit of this new pension scheme as a result of which there has been an accumulation of nearly Rs. 3,700 crore in the pension corpus.
Out of this Rs. 3550 crore has been contributed by central government employees and the rest by state government employees.
"This performance is because of the strong credit-profile portfolio and better equity stocks selection," says Balram Bhagat, CEO, UTI Retirement Solutions.
As per the new pension scheme, fund managers have to invest 85 percent in debt while the rest is to be invested in equity.
Bhagat said that NPS had not grown as expected because the system did not involve advisors to push these schemes.
The PFRDA decided that it would not follow the model of distributing products through agents, a practice followed by the insurance industry and AMCs that offer mutual fund schemes. The reason behind this was to protect subscribers from agents that mis-sell and keep the cost of transactions low. However, this has not really paid off.