FinMin makes compromises to ensure passage of pension Bill

New Delhi, August 10 : Aware of the precarious balance the UPA finds itself in Parliament and to ensure that pension reforms receive all party support, the finance ministry has compromised on four significant aspects of the Pension Fund Regulatory and Development Authority (PFRDA) Bill.

According to Government officials, the finance ministry has decided to include the 26 per cent cap on foreign direct investment (FDI) in pension funds in the main Bill. This is similar to the legislation in the insurance sector that specifies the cap in the Insurance Act itself. Earlier, the ministry had proposed to relegate the FDI provision in the regulations, thus obviating the need to go back to Parliament for hiking the limit.

The second major change relates to providing subscribers the option to invest their pension fund contributions entirely in debt, making it a risk-free avenue. This has also been included in the Bill. This was done based on the recommendations of the Parliamentary Standing Committee on Finance to placate Left parties that were completely opposed to the Bill. The investment options were earlier supposed to be part of rules and regulations to be framed by the regulator once the legislation was enacted.

In allowing pension funds to invest 15 per cent of their corpus in equity (5 per cent directly in stocks and 10 per cent in equity-based mutual funds), the ministry had earlier not specified if overseas investments were allowed. Now, in an effort to find all round support, including from the Left, the ministry has proposed in the Bill that funds would not invest the corpus abroad.

The last issue relates to the choice of funds to manage the contributions of government employees who joined service after January 1, 2004. The Bill, to be introduced in the next session of Parliament, specifically says that there should be at least one public sector fund manager among the various fund managers to be appointed by the regulator.

Now

•Ministry decides to include the 26 per cent cap on foreign direct investment in pension funds in the main Bill

•Subscribers will be provided the option to invest their pension fund contributions entirely in debt, making it a risk-free avenue

•To get all round support, including from the Left, ministry proposes that funds would not invest their corpus abroad

•Bill says there should be at least one public sector fund manager among the various fund managers to be appointed by the regulator

Then

•Ministry...

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