Pension regulator plan may not materialise

The new government at the centre may drop the proposal for creating a separate pension regulator. The North Block is toying with the idea of merging the proposed pension regulatory body with the Insurance Regulatory and Development Authority (Irda), sources said.

"Instead of having a separate pension regulator, there could be a new member at the Irda to oversee the pension sector," said a source in Delhi.

This essentially means that the Irda will have four members instead of the current three. At present, Irda has life, non-life and actuarial members.

It may be recalled that when P C Chidambaram was finance minister in 1996, he had favoured an integrated approach to opening up the insurance sector.

He had pushed privatisation of the health insurance and pension industry, which were then seen to be least controversial.

Senior officials in the North Block said the government is likely to review the formation of a separate pension authority, especially since the Pension Act has not as yet been passed.

The former NDA-led government had proposed setting up an independent Pension Fund Regulatory and Development Authority, which has led to a fresh debate in the industry.

"Creation of more and more regulatory bodies to regulate sub-components of the financial sector will prove to be counter-productive," said sources.

The general consensus among industry chiefs is that pension funds should come under the umbrella of the Irda and a separate body will not serve any purpose.

"As life insurance companies are already offering pension plans, a unified policy for a single product is important so that customers are not confused," said a CEO of a leading private sector insurance company.

There is vast discrepancy in the proposed regulations for the pension sector under the proposed pension authority, as opposed to existing norms for insurance companies.

There is lack of clarity in terms of the capital requirement, foreign ownership, investment norms, whereby the entire framework puts insurance companies under Irda at a comparative disadvantage.

Bringing both insurance and pension under the sole supervisory ambit of Irda and doing away with multiple regulatory authorities will help the development of the pension industry, sources said.