By IANS,
Chennai : Welcoming the union cabinet’s nod to allow FDI of 26 percent or higher for pension, a sector regulator said passing of the relevant bill by parliament will clear doubts of potential investors.
“The impact of parliament passing the pension bill will be that the authority will get statutory backing. This would enable the regulator to monitor the players more effectively and clear doubts in minds of potential players and investors,” Yogesh Agarwal, chairperson, Pension Fund Regulatory and Development Authority (PFRDA), told IANS over the phone from New Delhi.
The cabinet Thursday cleared proposals to amend the legislations governing insurance industry to hike foreign equity from 26 percent to 49 percent.
In pension sector, the cabinet decided to allow 26 percent or such percentage as may be approved for the insurance sector, whichever is higher, may be incorporated in the Pension Fund Regulatory and Development Authority Bill, 2011.
Amendments to the bill will be moved in the next session of parliament.
Agarwal said the move would bring in more players into the pension sector while agreeing that in terms of foreign direct investment (FDI), the sums would not be huge as in the case of the life insurance sector.
For pension fund managers, the minimum capital required is Rs.25 crore where as in the case of life insurers, it is Rs.100 crore.
Further, majority of the life insurers are suffering from expense overrun needing fresh capital infusion.
According to Agarwal, the New Pension Scheme (NPS) is doing well in the government sector while in the private sector, issues of distributor remuneration and their reach are being addressed.
“The NPS corpus now is around Rs.21,000 crore ($4 billion),” Agarwal said.
The union cabinet also accepted following recommendations of a Standing Committee on Finance:
(a) Allowing a subscriber seeking minimum assured returns to opt for investing funds in schemes providing minimum assured returns as notified by PFRDA.
(b) Withdrawals not exceeding 25 percent of the contribution made by subscriber will be permitted from individual pension account, subject to conditions.
(c) Setting up of Pension Advisory Committee with representation from all major stakeholders to advise PFRDA on framing of regulations.
(d) PFRDA membership will be confined to experts in economics, finance or law.
However, the government did not accept the following recommendations:
(a) Compulsory insurance of funds of subscribers by pension fund managers. A provision has already been made in PFRDA bill to protect subscribers by ensuring safety of contribution and keeping operational costs in check.
(b) Selection of fund managers in such a manner that one third of them are from the public sector.