Vineeta Rai to move out of pension authority

In a total overhaul of the Interim Pension Regulatory and Development Authority (PFRDA) by the government, Revenue Secretary Vineeta Rai has been asked to move out of her post as chairperson.

Simultaneously, the two full-time members of PFRDA, Anand Bordia and P N Venkatachalam have also resigned, to pave the way for the government to restructure the authority. The government accepted their resignations today.

Despite a clear vaccum at the top in the regulatory body, finance ministry officials said no final decision had been taken yet on the industry's demand to merge the PFRDA with the Insurance Regulatory Development Authority (IRDA).

As originally planned, the officials said, a bill to lend statutory backing to the regulator, was being prepared by the ministry. In a recent meeting with corporate chieftains organised by the Confederation of Indian Industry, Finance Minister P Chidambaram said that he had not made up his mind on PFRDA.

However, the PFRDA, now running with a skeletal staff, has had to postpone its plans to appoint a Central Record-keeping Agency even though companies like NSDL and UTI-ISL have pitched for the assignment, a couple of months ago.

It has also pushed back the schedule of presentations from prospective fund managers for the sector. The officials said the absence of a chairperson at the PFRDA would not affect the passage of the bill, should it be introduced.

They added that there were no instructions from the ministry to the two members to resign. Bordia who was member (finance) in National Highway Authority of India before has, meanwhile, reverted to his former position.

Since the launch of the new defined contribution-based pension system, with effect from 1 January, 2004, nearly 2000 new government recruits have joined the scheme. The numbers were swelling every month, with fresh recruitment.

Incidentally, the finance ministry order appointing Rai as the Chairperson of the PFRDA, issued on 6 May, 2004 said that she would continue to hold office for a period of two years, or till a statutory PFRDA was appointed, whichever was earlier. It also specified that Rai would continue to hold the PFRDA post as an additional charge.

Sources close to the revenue secretary said she would now retire on her superannuation from the ministry.

In Budget 2004-05, the finance ministry has also extended a tax benefit for investment in pension funds under section 80CCD of the Income Tax Act.

Up to ten per cent of the salary of central government employees, paid into a pension fund, would be eligible for deduction from his income before computing his tax liability. But withdrawals from the pension fund would face a tax in the year they are pulled out.

No need for new pension body: Ficci

Opposing the Rangachary Committee report on pension funds, Ficci said there was no need to create a new regulatory authority for pension system.

A pension fund committee headed by Rangachary had earlier suggested the formation of an independent authority called Pension Fund Regulatory Development Authority.