Transfers put pension reforms on back seat
The return of key officials, who were deputed to the pension regulator from the Insurance Regulatory and Development Authority (IRDA), has sparked speculation on pension liberalisation.
By TNN |
MUMBAI: The return of key officials, who were deputed to the pension regulator from the Insurance Regulatory and Development Authority (IRDA), has sparked speculation on pension liberalisation.
The Pension Reform Bill was expected to be passed in the winter session of Parliament following which the Pension Fund Regulatory Development Authority (PFRDA) was expected to invite private fund managers to bid for managing pension funds.
Prabodh Chander, executive director, who was one of the earlier officials to be appointed to the IRDA in ’97, had played a key role in drafting regulations and issue of licences. After the creation of interim PFRDA, he was deputed to help establish the fledgling regulatory body.
Mr Chander has been transferred back to the IRDA with effect from October ’06. Along with Mr Chander, another deputy director Kamal Choudhary is also expected to return to the insurance regulatory authority.
There is speculation in a section of the insurance industry that Mr Chander’s return could be an indication that his services may not be needed immediately in PFRDA. Some feel that this could be interpreted as a further delay in opening of the pension sector. However, at the same time IRDA, too, is facing a talent shortage. For instance, it is yet to appoint a life member in place of TK Bannerjee, who retired several months ago.
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The pension bill will primarily allow private companies to manage pension funds of new government employees. The scheme will apply to those who have joined in recent years only, as earlier employees enjoy a defined benefit scheme whereas the new employees contribute to a fund and will get pension in terms of the returns generated by the fund. In addition, the private fund managers can also manage voluntary pension schemes of self-employed persons.This would mean that there will not be any significant corpus for fund managers. However, asset management companies are optimistic that in due course, retirement funds of other public sector companies will also be thrown open to private management.
Recently, there have been reports that the government is close to arriving at an understanding with the Left parties regarding the pension bill.
The contentious issue in pension reform as in the insurance sector is that of foreign ownership. Limiting foreign shareholding to 26% may be seen as a retrograde step considering that the government has already recommended that the cap on foreign holding in insurance companies be raised to 49%.
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