Wait for pension reforms over

It's a sector that has been waiting for a full-time regulator for almost a decade but the wait for a pension watchdog, armed with legislative backing, may finally be over with Cabinet on Thursday endorsing the Pension Fund Regulatory and Development Authority Bill. What's now left is some political bargain, especially over the level of foreign investment that will be permitted. 

While the government took the bold decision to allow 49% overseas investment in insurance — and repeat the clause for pension, if approved — in a move that will attract political opposition, it has sought to placate the principal opponents by inserting a new clause that will offer a minimum assured to the risk-averse investors who are willing to settle for lower returns. 

In addition, the Bill proposes to permit subscribers to withdrawal up to 25% of the contribution in case of an emergency. While the other two amendments suggested by the parliamentary standing committee, and accepted by the government, deal with the functioning of the pension regulator, the market is eagerly looking forward the legislation that has been on the drawing board for over a decade now. 

Market players say a law will end the speculation on the future of the scheme, which has prevented many individuals from starting low-cost post-retirement savings plan. While the commission paid to fund managers and the points of presence, which collect subscriptions, are often blamed for the slow take-off of the scheme in the private sector, the returns that most funds have turned out has also not helped matters. 

The scheme is optional for non-government employees since May 2009, for those working for the Centre or with a majority of the state governments, the National Pension Scheme is mandatory. All central government employees who joined from 2004 have to mandatorily contribute 10% of their salary and the government chips in with an equal amount. The Bill, cleared by the cabinet on Thursday, will be moved in the next session of the Parliament, it added. The Bill was first introduced in 2005.

Source:-The Times of India