HDFC Pension eyes Rs 10,000 crore AUM in FY20
Pension fund manager HDFC Pension Management is looking to touch assets under management (AUM) of Rs 10,000 crore in FY20. In an interaction with Moneycontrol, Sumit Shukla, CEO, HDFC Pension said retirement is a big opportunity for the company.
“We are hoping to close the year with an AUM of Rs 10,000 crore in FY20. The idea is to move far ahead of the competition in this sector,” said Shukla.
HDFC Pension is a wholly-owned subsidiary of HDFC Life Insurance. The AUM stood at Rs 5,170 crore in FY19 and the company touched Rs 6,000 crore AUM in July 2019.
At the end of Q1FY20, the company was the fastest-growing Pension Fund Manager (PFM) under the National Pension System (NPS) architecture. HDFC Pension saw year-on-year (YoY) growth of 96 percent in its AUM.
Among private-sector PFMs, HDFC Pension’s market share grew to 27.7 percent in June 2019 from 23 percent in June 2018.
From a tax perspective, NPS also has been given an exemption for the lump-sum withdrawal portion. This effectively means that 100 percent of the amount that is withdrawn at the time of retirement is tax-free. Shukla said while the government has done its bit with respect to making NPS attractive to customers, fixing the distribution margins will further boost numbers.
NPS is a voluntary, defined contribution retirement savings scheme. Under the NPS, individual savings are pooled into a pension fund which is invested by PFRDA regulated professional fund managers as per the approved investment guidelines into the diversified portfolios comprising of government bonds, bills, corporate debentures and shares.
“We are guiding people to move from superannuation to our retirement products. Compared to EPFO, our returns are much better at a blended rate of 10.5-11 percent,” said Shukla.
A majority of the company’s business comes from private-sector employees. Government business has just started to come in and constitutes less than 1 percent of the business for HDFC Pension.
“Compared to other sectors, the stickiness of our customers is high. This is because they do not change fund managers quickly,” he added.
The company has also taken up a Point of Presence licence that will help them service customers’ needs from the start to the end. Shukla explained that through the POP licence, they would be able to get access to customer data and help cross-sell.
The biggest challenge according to Shukla is distribution. “Distributor apathy is the bigger problem. They do not want to sell at the current price,” he said.
Currently, POP selling NPS get 0.25 percent of the contribution subject to a minimum of Rs 20 and a maximum of Rs 25,000 as commission.Subscribe to Moneycontrol Pro and gain access to curated markets data, trading recommendations, equity analysis, investment ideas, insights from market gurus and much more. Get Moneycontrol PRO for 1 year at price of 3 months at 289. Use code FREEDOM.