Insurance companies might have to float separate subsidiaries and procure requisite permission if they intend to act as fund managers for pension products.
Explaining the modus operandi of such companies, a member of the Insurance Regulatory Development Authority (Irda) H S Sonig said, "These companies will also have to adhere to solvency margins and will not be allowed to sell pension products, for the fund managers will have to be different from the fund providers. The funds will be managed in the form of trust".
Addressing the Bengal Chamber of Commerce & Industry, Kolkata, Sonig said the finance ministry has directed Irda to draw an implementation procedure of the pension sector which is expected to be implemented by October 31, 2002. The reforms are expected to be complete by March 2003.
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The recommendations on pension reforms submitted by the Irda some time back allows any number of companies into the fray provided they conform to the basic requisites that will be laid down by the government in consultation with Irda. There will either be separate entities that will steer the sector to the required direction or Irda itself will be in charge.
Sonig referred to the OASIS report to point out that there would be three broad category of products -- equity linked, balanced product and a secured product where return will be low but the product will be a risk free one.
Customers will have the privilege of choosing between the three on the basis of which the fund will be parked. The recommendations involved defining new types of distribution channels for pension products and subsidiaries being formed. Different entities can apply for a subsidiary for different channel and there will be two forms of each product - a personal one and a group pension one.
The recommendation also stressed on development of infrastructure for the sector. Sonig said the present level of fund in the sector which is Rs 56,000 crore is expected to reach Rs 4 lakh thousand crore in another 10 years.
Irda may also allow entry of mutual funds into the business, because the regulator intends to intensify competition and ensure higher coverage to pensions especially in the unorganised and the private sector.