New Delhi:
The Lok Sabha today passed the Pension Fund Regulatory and Development Authority Bill 2011, which will open the doors for foreign investment in pension funds. The bill aims to create a regulator for the pension sector and extend the coverage of pension benefits to more people. The Pension Bill has been hanging fire since 2005 when it was first introduced in the Parliament. It was again reintroduced in 2011.
Here are the salient features of the bill:
The Pension Fund Regulatory and Development Authority Bill 2011 will give statutory powers Pension Fund Regulatory and Development Authority (PFRDA) which was established in August 2003 as a regulator for the pension sector.
The bill allows 26% foreign direct investment (FDI) in the pension sector or such percentage as may be approved for the insurance sector, whichever is higher. At least one of the pension fund managers shall be from the public sector.
The subscriber seeking minimum assured returns shall be allowed to opt for investing their funds in such scheme providing minimum assured returns as may be notified by the authority.
Withdrawals will be permitted from the individual pension account subject to the conditions, such as, purpose, frequency and limits, as may be specified by the regulations.
This bill would also provide subscribers a wide choice to invest their funds including for assured returns by opting for government bonds etc as well as in other funds depending on their capacity to take risk.
The New Pension Scheme has been made mandatory for all the central government employees (except armed forces) entering service with effect from 1.1.2004. Twenty-six states have already notified NPS for their employees.
As on 14th August, 2013, the number of subscribers under NPS is 52.83 Lakh with a corpus of Rs. 34,965 crore.
NPS had been launched for all citizens of the country including unorganised sector workers, on voluntary basis, with effect from 1st May, 2009.
The passage of the bill could see pure pension products coming into the market. At present most of the pure pension products available in the market are linked with insurance coverage.
In 2005, the government had earlier introduced a pension bill but it lapsed as the Lok Sabha's term got over before the legislation could be passed. The Pension Fund Regulatory and Development Authority Bill 2011 was reintroduced in the Lok Sabha in 2011 by the then finance minister Pranab Mukherjee and it was subsequently referred to a standing committee.
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