New Delhi: A key economic reforms legislation, the Pension Bill, that provides for investment of funds in equity market and opens the sector to at least 26 per cent FDI was on Wednesday passed by the Lok Sabha, with Congress and main opposition BJP joining hands together.
The passage of the Pension Fund Regulatory and Development Authority (PFRDA) Bill, 2011 came on a day when it appeared that the House could be stalled over the coalgate issue but negotiations with BJP leadership saved the day for the treasury benches.
The Bill was passed after rejecting the opposition amendments with final voting reflecting a support of 174 MPs for and 33 against. Left parties, TMC, DMK and AIADMK opposed the Bill.
Replying to the debate, Finance Minister P. Chidambaram said the Bill would make the Pension Fund Regulatory and Development Authority a statutory authority, unlike its present status of non-statutory nature.
The Bill provides subscribers a wide choice to invest their funds including for assured returns by opting for Government Bonds as well as in other funds depending on their capacity to take risk, a provision that came from opponents of the legislation.
It pegs the FDI in pension sector at 26 per cent or such percentage as may be approved for the insurance sector, which ever is higher.
The New Pension System (NPS) is based on principle that "you save while you earn" especially for retirement and is mainly for those who have a regular income, Chidambaram said.
He said the government had accepted all but one of the recommendations of the Standing Committee on the subject.
Key recommendations of the Standing Committee were:
that the subscriber seeking minimum assured returns shall be allowed to opt for investing his funds in such scheme providing minimum assured returns;
Withdrawals will be permitted from the individual pension account subject to the conditions, such as, purpose, frequency and limits, as may be specified by the regulations;
At least one of the pension fund managers shall be from the public sector;
To establish a vibrant Pension Advisory Committee with representation from all major stakeholders to advise PFRDA on important matters of framing of regulations under the PFRDA Act.
It will have provision for withdrawals for limited purposes from Tier-I pension account, an incentive for subscribers to join the New Pension Scheme (NPS).
The corpus of the NPS having 52.83 lakh subscribers (including those of 26 state governments) was about Rs 35,000 crore.
The bill also seeks to grant statutory status to the Pension Fund Regulatory and Development Authority.
"....Rs 35,000 crore should not be used by unstatutory authority...All this Bill does is to make non-statutory authority a statutory authority," Chidambaram said, adding the authority will have powers to penalise.
The subscriber seeking minimum assured returns would be allowed to opt for investing funds in such scheme providing minimum assured returns as may be notified by the Authority.
The bill was referred to the Standing Committee twice - in 2005 and 2011.
PFRDA was established by the government in August, 2003.
The NPS has been made mandatory for all the central government employees (except armed forces) entering service with effect from January 1, 2004. It has been launched for all citizens of the country including unorganised sector workers, on voluntary basis, from May, 2009.