INDIA - The India government should set up a regulatory authority for pension funds with specific functions for its proper growth, chairman of Insurance Regulatory and Development Authority (IRDA) of India, N. Rangachary, said.
We feel that there should be a regulator first to supervise the entire pension fund system and prudential regulations be put in place, Rangachary said. The regulator could be entrusted with various functions to decide on how and at what pace the pension funds should grow, he added.
In a bid to create an assurance of full accounting of the liability to the pension fund market, the IRDA in its report on Pension reforms in the unorganised sector has recommended some sort of 'performance guarantee' from the pension fund players.
The report has been submitted to the ministry of finance. If implemented, the pension fund players will be the first among the capital market players to give any kind of 'performance guarantee' to the government to receive a license. The report has suggested that in order to encourage contractual savings and pensions/annuities in particular, only long term savings should be accorded preferential tax treatment.
Referring to the IRDA report on pension reforms, Rangachary said The earliest we can install a system is 10-12 months. However, if some regulatory changes were necessary, then it would take more time - two to three years.
IRDA has suggested to limit the options open on the issue of exit of a provider from the system. While the regulator does not rule out the possibility of such an event taking place in a free market system, it must be ensured that it happens less frequently and when it does, a free portability available to the subscribers will enable smooth transfer between/among the provider who shall not suffer any costs in losses, the report says.
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