Life insurance players may be allowed into pension fund segment

The Pension Fund Regulatory Development Authority (PFRDA), which is envisaged to be set up in the next 12 months, may allow the participation of life insurance players in the pension fund segment.

This apart, the armed forces, which have been kept out of the new pension scheme that started on January 1, 2005, are also likely to be covered in the second phase of the scheme.

Speaking at the Ninth Insurance Summit held here today, U K Sinha, joint secretary, department of economic affairs, ministry of finance,said, "The government has not ruled out the option of allowing life insurance players in the pension fund segment."

Anuroop 'Tony' Singh, vice-chairman of Max New York Life Insurance Company Limited, earlier said that if life insurance players were not allowed to participate in the pension sector, the market share for their long-term liability products would be affected.

"This apart, although now the new pension fund scheme is applicable to central and state government employees, it is scalable to armed forces as well," Sinha said. This, however, may be possible only in the second phase of the pension scheme, he added.

"The government issued an ordinance on December 30, 2004, for setting up a PFRDA parallel to Irda and Sebi. The ordinance is likely to be replaced by a legislation in the coming Budget session," Sinha said.

"However, around five domestic companies and two foreign companies have already started showing interest in handling the Central Record Keeping Agency of the PFRDA," he added.

Some of these companies include National Securities & Depository Ltd, Central Depository Services India Ltd, UTI Investor Service, Stock Holding Corporation and Computer Age Management Services Private Ltd (CAMS), Sinha said.

The Central Record Keeping Agency will be involved in maintaining and managing transactions in the pension sector. "The issue on whether to have limited or unlimited pension fund managers is, however, still being debated upon," Sinha said.

"The PFRDA that has been empowered to regulate pension fund managers will be allowed to play the role of an arbitrator as well," Sinha said. Therefore, the regulator will be allowed to solve disputes pertaining to the pension sector, he added.

"The total corpus for pension funds today amounts to Rs 12,600 crore per annum," Sinha said. The number may grow to Rs 1 trillion in the next six years, he added.

The PFRDA would have three full-time and two part-time members apart from the chairman. Six state governments, including Andhra Pradesh, have showed their willingness to be a part of the new pension scheme.