Parliament’s standing committee on finance has favoured capping of foreign investment in the pension sector at 26 per cent.
In its report on the Pension Fund Regulatory and Development Authority (PFRDA) Bill, it says this and other aspects of the policy on foreign direct investment (FDI) in the sector should be detailed. For, it has said, “pension fund managers holding the stake of the old age/income security of their clients cannot be compared with other agencies/companies/institutions in the financial sector”. Any permitting of FDI in the pension sector should be implemented only by amending the present legislation, not by executive order.
In this regard, it has rapped the government’s attitude on returns for the funds of subscribers to the New Pension Scheme. It says it is dismayed at the approach, as the subscribers have no implicit or explicit assurance of benefits.
“As any effective pension scheme needs to be underpinned by stability of returns and reasonable post-retirement incomes, it is imperative that Government provide for a minimum guaranteed return and not the mere camouflage of a market-based guarantee, which should not be less than the minimum return available currently under the (older) defined benefit pension scheme,” said the panel.
It says the minimum rate of return on contributions to the pension fund should not be less than the rate of interest on the Employees Provident Fund scheme. “If there is any shortfall, then the government in its budget could bear the same and assume that additional responsibility,” it has said. It wants the relevant clauses in the Bill to be accordingly altered.
