The Insurance Regulatory and Development Authority (IRDA) chairman N Rangachary today floated the idea of having non-transferable, interest free "pension bonds" to promote social security among workers of the unorganised sector and those self employed.
The bonds, which could have a face value of Rs 100 or Rs 1,000, could be subscribed by investors depending on their surplus funds in a particular year and, unlike other bonds, would carry no interest. After the subscriber retires, interest income generated from the corpus collected by him during his lifetime could be repayed in the form of pension, Rangachary told reporters here.
"I want you (media) to float the idea so that we can get comments from the people concerned. Then we can decide if we or the government would issue the bonds and who would manage the scheme keeping in mind the highest safety of investment," he said on the sidelights of a function to mark the second anniversary of appointment of insurance ombudsman for Delhi.
Having bonds with a small par value would make the entire scheme very flexible for subscribers and it would be easier to manage, Rangachary said, adding the bonds could be sold by banks or post offices in order to make them easily accessible for people in the unorganised sector.
The insurance regulator said the bonds should enjoy the same tax benefits as other similar schemes.
Although insurance companies and mutual funds have evinced interest in coming up with pension schemes, IRDA is thinking of a better and cheaper social security scheme. The idea is being debated upon in meetings of the regulator with banks, mutual funds and finance ministry officials, before being given a final shape, Rangachary said.
IRDA is working on the S A Dave committee report on old age social and income security (OASIS) which suggested a number of layers for pension stream involving banks and post offices as collection points of pension premium, insurance mutual funds for managing the funds and insurance companies for the annuity payments.
The insurance industry regulator is in favour of allowing banks and mutual funds in the pension sector but is yet to finalise the modalities, he said, adding the final report has to be submitted to the finance ministry by October 31.
