The Union Cabinet on Thursday approved the amendments to the Pension Fund Regulatory and Development Authority Bill, 2011 opening up the pension sector to foreign investment.
The Cabinet did not specify the foreign direct investment (FDI) cap in the pension sector but the Finance Minister, P. Chidambaram said it would be at par with the limit set for insurance companies which has now been raised to 49 per cent.
Mr Chidambaram said that all five recommendations of the Standing Committee on Finance which examined the Bill have been accepted. The amendments approved by the Cabinet specify that the subscriber seeking minimum assured returns shall be allowed to opt for investing his funds in such schemes notified by the Authority. Withdrawals not exceeding 25 per cent of the contribution made by subscriber will be permitted from the individual pension account subject to the conditions, such as, purpose, frequency and limits, as may be specified by regulations by the Pension Fund Regulatory Authority and Development Authority (PFRDA).
A Pension Advisory Committee with representation from all major stakeholders will be constituted to advise PFRDA on important matters of framing of regulations under the PFRDA Act; the membership of the PFRDA will be confined to professionals having expertise in economics, finance or law only.
The New Pension Scheme (NPS) has been made mandatory for all the Central Government employees (except Armed Forces) who entered service on or after Jan.1, 2004. 27 State /UT Governments have notified NPS for their employees. NPS has been launched for all citizens of the country including unorganized sector workers, on voluntary basis, with effect from May 1, 2009.
In order to effectively invest and manage such huge funds belonging to a large number of subscribers and to ensure the integrity of the NPS, creation of a statutory PFRDA with well defined powers, duties and responsibilities is considered absolutely necessary and would benefit all NPS subscribers.