Entry only via subsidiaries or joint ventures
Insurance companies will not be allowed to enter the pension funds sector on their own, according to proposals firmed up by the finance ministry.
The idea is to avoid a potential conflict of interest over jurisdiction between the Insurance Regulatory Development Authority (IRDA) and the proposed pensions regulatory and development authority.
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Insurance companies can, however, form subsidiaries or joint ventures with other players to form entities to tap the new market.
According to the draft proposals, expected to be approved by the Cabinet soon, all contributions to the pension schemes will be regulated by the pensions regulatory body and the payouts by IRDA.
Contributors will have to put a part of their funds in the annuity schemes of life insurance companies when their deposits mature.
The investment norms for the six pension funds will also be more stiff than those for insurance companies. For the base-level pension schemes, the funds will have to invest 65 per cent of their corpus in government securities. They will also have to publish daily net asset values on the lines of the mutual funds to instil confidence among depositors.
The other aspects of investments will be guided by the Securities and Exchange Board of India norms for mutual funds.
A government official said the number of players had been restricted to six so as not to confuse depositors. However, the Centre was open to liberalisation in the sector later, he said.
Non-government employees will be allowed to deposit funds in post-offices. The backoffice record-keeping duties will be in the purview of National Securities Depository Ltd (NSDL). For government employees, too, the interface between the Pay and Accounts office and the funds manager will be through NSDL.
The tentative date for launching the scheme has been set for October 2.