Pension Fund Regulatory and Development Authority (PFRDA) Bill Features, Issues

Pension Fund Regulatory and Development Authority Bill, 2011

• has been pending for several years, seeks to open the pension sector to private sector and foreign investment.

• If it was passed by cabinet in June 2012, it could be tabled in parliament in the Monsoon Session starting in July 2012.

• But Trinamool Congress, a key ally of UPA opposed it and hence the bill has been put on backburner yet again.

• Trinamool’s official reason: this PFRDA bill is against the intersest of common man.

• Unofficial reason (if one believes the IndianExpress frontpage 08 June 2012), is that West Bengal Government wants debt relief of Rs.25,000 crores from the Union Government and unless and until it is given, they’ll continue to stall all the bills and policy issues like FDI in Multi-brand retail, Pension Reform bill etc.

History

• PFRDA, set up as a regulatory body for pension sector, is yet to get statutory powers as the Bill pertaining to that effect lapsed in Parliament with the expiry of last Lok Sabha in 2009.

• Interim PFRDA is functioning since 2003 through an executive order.

• It was introduced in the Lok Sabha on March 24, 2011 was referred to the Standing Committee headed by senior BJP leader and former Finance Minister Yashwant Sinha for scrutiny.

• Committee wanted the government to specify the FDI cap in the legislation itself, besides providing for minimum guaranteed return to pension subscribers.

Salient Features of PFRDA Bill 2011

Establishment of a statutory authority to undertake promotional, developmental and regulatory functions in respect to pension funds. It proivdes for 26% Foreign Direct Investment (FDI) in the pension sector, just like it is in the insurance industry. Bill will provide greater flexibility to subscribers to withdraw funds from their accounts, and Assured returns to pension fund subscribers. It also alters the name of the New Pension System to National Pension System (NPS).

What is NPS?

NPS is a ‘defined contribution’ scheme for all central government employees who joined after January 2004.  It is implemented through a combination of retailers, pension fund managers, and a record keeper.  Under the NPS, every subscriber will have an individual pension account, which will be portable across job changes.  The subscribers will choose fund managers and schemes to manage their pension wealth.  They will also have the option of switching schemes and fund managers. The NPS was extended to all general citizens through central government notification in 2009.

Mock Question

Which of the following statements are correct? PFRDA is a statutory body. PFRDA is a Constitutional body IRDA is a statutory body SEBI is a statutory body FDI cap in Insurance Sector is 26% Monsoon session of parliament begins in November.