• Investment World
• eWorld
• Catalyst
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest

Sarbajeet K. Sen

NEW DELHI, March 26

WHILE the Insurance Regulatory and Development Authority (IRDA) might have lost the race for the new pension regulator, the Government has in store a consolation prize for it.

According to the plans for the new pension system, IRDA would continue to regulate the annuities and other-related developments in the payout stage of the new pension scheme even after the setting up of the Pension Fund Regulatory and Development Authority (PFRDA).

According to senior officials, the Ministry of Finance has decided that the annuities market would continue to be handled by IRDA since under the present laws, only life insurance companies are allowed to handle the payout stage.

"IRDA would step in at the stage when the annuities are purchased by the pension subscriber on attaining the age of 60 years. All stages prior to that would be handled by PFRDA," they said.

Annuities constitute the final stage of an individual's pension plan. The annuity provider, which are the life insurance companies, convert the lump-sum amount that has been accumulated over the years in the pension account into annuities which come back to the subscriber as monthly payments during the remaining period of life.

According to the IRDA report on pension reforms, nearly half the work in a structured pension system involves taking care of the payout or the annuity stage. It had mentioned that this justification should be enough for allowing the entire pension market to be regulated by the insurance regulator itself.

"Out of the integral part of the pension system, the last module, namely paying out the annuity to the subscriber-contributor will have to be exclusively handled by a life insurance company. Life insurance is today subjected to the regulation of IRDA. Nearly 50 per cent of the work of an integrated pension system is thus taken care of by the IRDA's supervisory regime," the IRDA report had pointed out while arguing why it felt it was best placed to regulate the pension market.

However, the Government had other plans in mind and announced in the Budget that a new and independent pension regulator would be set up that would be responsible for overseeing both the Government pension and other pension markets, including that of other private sector salaried class and self-employed.

According to the preliminary scheme drawn out by the Centre, PFRDA would license six pension fund managers (PFM) in the initial phase, one of whom would be drawn from the public sector. The PFMs would manage the funds of subscribers to the new pension system to optimise their gains till the attainment of 60 years of age by the individual.

Article E-Mail :: Comment :: Syndication

Stories in this Section
IRDA may get annuity pie of pensions markets

Copyright © 2003, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line