INDIA - The Indian government will appoint the independent Pension Fund Regulatory and Development Authority (PFRDA) this month.
The announcement heralds major changes in the way in which India handles old age income security.
PFRDA will also open up the pension business to government employees first and then extend it to the private and unorganised sector.
According to the road map drawn up by the finance ministry, there will be six private fund managers and a central depository in the Indian pensions market. Banks and post offices will act as points for the collection of pension contributions.
The regulatory body will be modelled on the lines of the Securities and Exchange Board of India and the Insurance Regulatory and Development Authority (IRDA).
Official sources said that the new regulator will decide entry, investment and other rules, which will be applicable to the various players in the business.
By putting in place regulations for investment and other prudential norms, the new pension regulator could bring about a large expansion of the pension market, and with it more diverse and attractive pension schemes. But, for the time being, the new regulator would have the limited mandate to supervise a defined contribution scheme for Government employees and other private sector employees from whom their employers volunteer to offer the same scheme.
However, most industry experts do not subscribe to the government’s idea of establishing an independent pension regulator. “There is a logical relation between insurance and pension,” said NN Joshi, chief advisor, ING Vysya Life.
“Life insurance companies offer pension schemes and pension funds offer life insurance products. IRDA is best suited to handle pension too.”
The Confederation of Indian Industry and the Federation of India Chambers of Commerce and Industry also felt that the proposed new regulator should be under the supervisory ambit of IRDA.
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