Bill soon on separate pension regulator

The government has decided to set up a new regulator for the pension industry in India and will shortly introduce a legislation in Parliament.

"As announced in the Budget for 2004-05, the government will introduce suitable legislation in Parliament to provide a regulatory framework for the new pension scheme. The legislation will also provide for a separate pension fund regulator, which will have the responsibility of regulating, promoting and ensuring the orderly growth of the pension market," a finance ministry release said.

The government's statement ends speculation over who would regulate the industry. The previous National Democratic Alliance government had set up an interim Pension Fund Regulatory & Development Authority headed by Revenue Secretary Vineeta Rai. Later, there was talk of the Insurance Regulatory and Development Authority (Irda) taking over the function of the interim pension regulator.

The proposed legislation will be modeled in the lines of the Irda Act, 1999, and will define the functions of the regulator and the extent of penalties which it can levy.

Till the legislation is cleared by Parliament, the interim regulatory body is expected to continue, though there is a question mark over who will head it. Rai is scheduled to retire at the end of the month.

A defined contribution pension scheme was introduced on January 1, 2004, for central government employees recruited on or after that date, replacing the existing defined benefit pension system. In the initial stages, the armed forces have been kept out of the scope of the new scheme.

The government plans to invite global bids for allowing fund managers in the pension business. In the initial stages, six fund managers, including one public sector company, will be allowed to enter the business. More managers are expected to come in later.