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A single regulator for all pension products is needed, according to the Financial Stability Report published by the Reserve Bank of India . The report said the pension landscape in India is currently characterised by unregulated pension segments on the one hand and overlapping of the regulatory jurisdiction on the other.
"The current fragmented and heterogenous pensions sector could pose some challenges for effective regulation and supervision resulting in regulatory arbitrage and regulatory gaps, which may have an impact on the stability of the system," said the report.
Currently, Insurance Regulatory and Development Authority of India (IRDAI) regulate pension products in the insurance space. Pension Fund Regulatory and Development Authority (PFRDA) looks into the development of the pension sector and National Pension System (NPS) .
The FSR report said that in keeping with the Parliament's mandate of regulatory carve-out for pension products, developing a contiguous pension system involving collection, investment, fund management, record keeping and pay outs for orderly growth of the pension sector under the single regulatory umbrella of PFRDA will be in order.
"In order to ensure development of the pension sector in general and of NPS in particular, it is essential that distortions across financial instruments and groups of assesses are resolved and appropriate fiscal incentives are provided," said FSR.
It further said that iniquitous tax treatment not only disadvantages one financial product against the other but it also creates avenues for tax arbitrage.
