The Union Cabinet's decision to give statutory status to the Pension Fund Regulatory and Development Authority (PFRDA), though belated, is welcome. In 2003, the NDA government set up the PFRDA through an executive order. That it has taken eight years for the government to take that step does not in any way diminish the importance of the reform itself. For instance, the measure will enable millions of people, who are now without a worthwhile security net in the form of retirement savings options, to get the benefit of an organised, regulated pension. The PFRDA bill is expected to come before Parliament in the winter session starting next week. But then, political opposition to the bill remains. Specifically, the government has drawn flak for rejecting two of the recommendations made by the Parliamentary Standing Committee on Finance. While the government gave its nod for foreign direct investment (FDI) in the pension sector to an extent of 26 per cent, the bill makes no mention of the sectoral cap although the standing committee recommended it. Instead, the government has chosen to notify the cap under the rules to be framed under the proposed legislation. This is evidently because the government wants to have some flexibility in the matter of raising the cap to 49 per cent, if and when it decides to do so. After all, changing the rules is much easier than amending the Act for the simple reason that the latter requires Parliament's approval.
Obviously, the government's experience with the insurance sector — where there has been no political consensus on changing the cap on FDI that has been built into the relevant statute — has weighed with it in going for this hassle-free non-legislative route. The government is on an even stronger ground in not accepting the recommendation for a guaranteed minimum return to pension fund subscribers. The standing committee had wanted pension fund managers to be appointed on the basis of their commitment to generate minimum returns. No prudent investment policy would insist on guaranteed returns from stock market investments. Indeed, mutual fund subscribers are warned that investments in stock market instruments are subject to market risk. For pension fund subscribers, the time horizon is even longer and the authorities will have to go the extra mile to educate them. Subscribers must be made familiar with the risks and rewards that go with their chosen pension plan, whether the investment is in debt or equity, or in a combination of the two. Once the IPRDA bill becomes law, the New Pension Scheme, which has not made a mark so far, will get a big boost. The opening up of the pension sector will make available large, long-dated funds for infrastructure.
Keywords: Pension Fund Regulatory and Development Authority, PFRDA, retirement savings, FDI in pension sector
Move taken by UPA 2 is welcome, however the very meaning of
"Pension" is to let a person subsist with working, is lost!
I am aware that there is always an uncertainty over investments in
capital market, but at the same time attempt of the worker should not be
quashed to safeguard their future, in the time when the need money more
than today..
Hope to see some amendment in the winter session.
pension fund exposed to the stock market may be injurious for the people.the stock market is not reliable as it is clearly evident from 2008 financial crisis.the govt. cannot whisk away from the responsiblity of ensuring a secured pension benifit in the country where income is still low and social security by govt. inadequate
An alternative simplified solution. As beneficiaries of goods and services (BGS) it is the duty of us consumers to provide insurance-cum-pension to producers(providers) of goods and services (PGS). Withdrawals of money (transactions) from Banks roughly is an index of money spent by us collectively on availing of goods/services.
Average annual withdrawals through cheques etc. 160 lakh crores
Others like cash, inter-bank transactions 90 lakh crores
Total 250 lakh "
A levy of TDS of as little as 2% on Bank transactions would give an yield of Rs.5 lakh crores every year. This amt should be sufficient to give universal coverage of medical insurance and pension to the entire population. Readers who are convinced about the possibility of this Scheme can contact <sviss38@yahoo.com>.
Its the decision of the employee which scheme to join. They can join scheme similar to what they are getting now or one which promises higher returns. I feel the same person who are opposing the bill based on the "corporate connection" will join the funds which promise better return. The better return just means that the fund was used to generate more profits in some business.
That a pension fund can be a loss is an oxymoron. It is my life time achievement, my asset. People who invest in a pension fund really intend to invest in a "pension fund", not a pension "market". Those who want to invest in the market already have lot avenues. A mutual fund in the garb of a pension fund is plain mischief! This is UNACCEPTABLE.
Of course, stagnant money is akin to hoarded commodities. Both serve no useful purpose to the benefit of the community. However, the PFRDA Bill purporting to open up the pension sector to monopolies, foreign or domestic is fraught with danger. If the governance profile of the current edition of the UPA government is any indication, the workers will not trust the new initiative, for the government has antecedents saturated with anti-people and anti-worker initiatives in many issues. Malafide interests lurk behind the intention of the government to pass the bill for the induction of FDI sans the cap built into the statute. WORKERS CANNOT SUBJECT THEMSELVES TO ANY PERFIDY KNOWINGLY.
The PFRDA Bill was introduced by UPA II govt.with all the blessings of BJP,through a nod of Sushma Swaraj, the opposition leader, who came to the goverment's rescue when the house was found short of quorum as unsurprisingly both the parties are seen on the same pages of reforms. Simple arithmatics does not envisage a major hurdle in the passage of the contentious bill,about which the trade unions are apprehensive of the security of the pension fund. That the pension funds of the West were washed away in the deluge of uncertain Stock Exchange,is no good news for the pension beneficiaries, who mostly constitute the lower strata of the work force. The LPG policy, as it's wont offers the buttered bread of the economy to the corporate house, leaving the poor gather the scraps..Better,the UPA govt takes a leaf from the pages of West and ensure security of pension fund and address the concern of the trade unions.
Your editorial claims that FDI is necessary in this sector. This is a dubious claim and is not substantiated. Let us consider the merits of this case. Pension payments and pension fraud is a routine phenomenon in the phirang world - USA has pension issues which would make the current problems a joke. They have postponed the problem but the problem that the government would be short in future is genuine. Do we need Americans to design a pension payment system for us? Reducing the level of pension payments is a large issue in the current Greek problem. A puny nation of 20m is unwilling to accept lower pension levels and jeapordizes the EU and euro in the process - are these ideas we need to borrow? The sophistication and skill levels of phirang investment managers like those in Citibank, AIG etc. are such that they can sell a donkey to a goat. Do we need this sleaze ? Finally, in India we can raise 10b dollar IPO's without batting an eyelid. Why invite phirangs for the same ?
Flaying Central Cabinet's recent decision to allow foreign direct investment (FDI) in Pension Fund Management Agencies to the tune of 26% to begin with, Sankar Saha, General Secretary, AIUTUC has issued the following statement to the press today: "Evidently and clearly the Central Government's move is anti-worker in particular and anti-people in general. We have all along opposed introduction of New Pension System (NPS) that has snatched away long established right to defined benefit based pension payable from Government Exchequer. and creation of an independent Statutory Authority in the name of PFRDA empowered to administer, supervise and manage all affairs relating to all Pension Fund. For this purpose PFRDA Bill is pending before Parliament for enactment. While NPS is contributory i.e. takes money from pension seekers but refuse to commit Defined Pension, PFRDA inter-alia seeks to open Pension Fund to private sector for business. We reiterate that the pension is not a commodity, it is neither salable nor purchasable. It is a fundamental right of workers and employees. Social security is not a business, hence the question of investment in this area either domestic or foreign can't arise. With a ominous design corporate sector and its subservient political manager have been trying to popularize and sell the terminology ' Pension Market' which according to them is attractive for investment. The experience of the working people of almost all developed countries is sordid. Workers' contribution were invested in speculative market by Pension Fund Managers who later on declared themselves insolvent and consequently the workers were turned into beggars in their old age. That the government does not even agree to fix FDI Cap in the PFRDA Bill further exposes its motive to open the pension sector not only to domestic monopoly but also to foreign corporate houses entirely. We once again urge the Government of India to repeal both the NPS and PFRDA Bill as well as refrain from implementing the anti-people design to open Pension Sector to domestic and foreign monopolies. We do also call upon all sections of people of our country to develop united sustained movement to force the Central Government to retreat unconditionally."
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