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The Lok Sabha on Wednesday passed the crucial Pension Fund Regulatory and Development Authority Bill, 2011 that will open doors to foreign investments, create a regulator, and cover more people.
The Bill has been hanging fire since 2005 when it was first introduced in Parliament. It was reintroduced in 2011. Built on the principle that ‘you save while you earn’, especially those who have a regular income, makes it beneficial for the subscribers to the New Pension Bill in the long run.
The norms for foreign investment limits in pension will follow that which prevails in insurance, Finance Minister P. Chidambaram told the Lok Sabha adding that this was in line with the recommendations of the Standing Committee on Finance. The foreign investment limit in pension is tagged to the cap set for the insurance sector. For example, when the foreign investment limit in the insurance sector is increased to, say, 49 per cent from the current 26 per cent, the same will hold for the pension sector.
While the Pension Bill will be taken up in the Rajya Sabha in the next few days, the Insurance Bill will have to wait for the winter session, Chidambaram later told reporters.
It was a smooth sailing for the PFRDA Bill, 2011 in the Lower House thanks largely to the principal Opposition party, the BJP, extending support upfront.
Chidambaram moved nine amendments, including on the foreign investment limit and minimum assured returns. The Bill will allow subscribers seeking minimum assured returns to opt for such schemes as may be notified by the pension regulator. A subscriber will also have the option of investing all his funds in Government securities.
The Pension Authority, which was set up in October 2003, has been functioning as an interim regulator without a statutory recognition. With the corpus swelling to about Rs 35,000 crore over the years, it has become important for the regulator to have the status of a statutory authority.
Replying to the discussions on the Bill, Chidambaram said the Government had accepted all the recommendations of the Standing Committee on Finance except the one that wanted repayable advance allowed under NPS. This could not be accepted as it could turn the account into an overdraft account, Chidambaram said.
He said that an Authority (the PFRDA, in this case) will be respected and feared only if it has statutory backing and powers.
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