The Lok Sabha on Wednesday gave its approval to the Pension Fund Regulatory and Development Authority Bill (PFRDA), 2011, a long-pending but an important economic legislation providing for the establishment of an Authority to promote old age income security.
The bill seeks to establish, develop and regulate pension funds to protect the interests of subscribers to schemes of pension funds and assures minimum returns to subscribers. The government said the bill was based on the principle "you save while you earn".
The PFRDA Bill, 2011, provides for market based returns and wide coverage based on several investment options in the pension sector with an aim to building confidence in the subscribers. It will have provision for withdrawals for limited purposes from Tier-I pension account, an incentive for subscribers to join the National Pension Scheme (NPS).
Replying to the debate, Finance Minister P. Chidambaram said the government has accepted most of the recommendations of the Standing Committee. It was referred to the Standing Committee twice – in 2005 and 2011.
The corpus of the NPS having 52.83 lakh subscribers (including those of 26 state governments) was about Rs 35,000 crore. The bill also seeks to grant statutory status to the Pension Fund Regulatory and Development Authority. ``Rs 35,000 crore should not be used by unstatutory authority...All this Bill does is make unstatutory authority (into) a statutory authority," he said, adding the authority will have powers to penalise. The bill seeks to empower PFRDA to regulate the NPS.
The bill would also provide subscribers a wide choice to invest their funds for assured returns, like opting for government bonds as well as in other funds depending on their capacity to take risk.
The subscriber seeking minimum assured returns would be allowed to opt for investing funds in such scheme providing minimum assured returns as may be notified by the Authority.
The bill was referred to the Standing Committee twice -- in 2005 and 2011. The bill provides for 26 per cent foreign investment in pension sector or as may be approved for insurance sector, whichever is higher. It also provides that at least one of the pension fund managers shall be from the public sector.
The NPS has been made mandatory for all the central government employees (except armed forces) entering service with effect from January 1, 2004. It has been launched for all citizens of the country including unorganised sector workers, on voluntary basis, from May, 2009.