INDIA - Decks have been cleared for the long-awaited pension reforms with the IndianUnion Cabinet giving approval to a proposal to bring in legislation for establishing a separate regulator for the sector.
Finance minister P Chidambaram said the new legislation would empower the Pension Fund Regulatory and Development Authority (PFRDA) to appoint pension fund managers.
The proposed legislation will clearly demarcate the pension sector from the ambit of theInsurance Regulatory and Development Authority (IRDA), which had pitched for control of the sector.
The legislation will also lay down guidelines on the number of pension fund managers who will be allowed to enter the sector, prudential norms, investment criteria and the capital requirement of fund houses.
The cabinet's approval of the proposal of the finance ministry comes in the wake of mounting pension liabilities of the central and state governments.
Indications are that there would be only a limited number of pension fund managers, of which at least one would be from the public sector. Before approving pension fund managers, a central record keeping and accounting agency (CRA) would have to be set up, which would function as the nerve centre of the defined contribution pension schemes, replacing the existing defined benefit plans.
At present, there is an interim pension regulator, which was established by the previous government, while the controller general of accounts is working as the interim central record-keeping agency for new government employees from 1 January, 2005.
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