The revised version of the much-awaited pension reform Bill was tabled in Parliament on Thursday, to give statutory powers to the sector regulator. It has been tabled several years after an interim watchdog was constituted in October 2003, through an executive order.
The Bill was considered overdue since the New Pension System (the bill seeks to rename it National Pension System) has been operationalised.
The NPS, unlike the old pension system, does not necessarily have defined benefits and gives an option to the subscriber to put his retirement fund into the markets. The earlier version of the Bill was tabled as early as 2005.
However, at the time, the government was dependent on the support of the Left parties, opponents of the Bill. None of the Left-ruled states has joined the NPS for their employees; all the others states and Union Territories have adopted NPS.
Besides employees, NPS is also available for all citizens since last year.
As an incentive, the government contributes Rs 1,000 a year for the poor in case they join NPS.
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The interim pension watchdog has created the institutional arrangement of an NPS Trust, a central recordkeeping agency, pension fund and a trustee bank for NPS. “It has now become necessary to replace the interim arrangements with proper infrastructure under a regulatory framework in order to avoid future complications,” finance minister Pranab Mukherjee said. Since so much time had been taken to table the Bill, the government has already kept the option of specifying foreign investment in pension funds outside the purview of legislation, unlike the earlier version.
PFRDA, according to the Bill, will comprise a chairperson, three whole-time members and three part-time members. Before introducing this Bill, the government had already tabled the Banking Law (Amendment) Bill and a Constitution amendment to establish a goods and services tax.