Parliament passes key Pension Bill after about 9-year delay

Parliament on Friday passed the pension bill that seeks to give statutory powers to sector regulator and also allows at least 26% foreign direct investment in the sector. The Pension Fund Regulatory and Development Authority (PFRDA) Bill, 2011, was passed in the Rajya Sabha that had been already approved by the Lok Sabha on Wednesday. 

"Some of them (members) have legitimate concerns, which we have to address. 

The bill has travelled for nine years. Let us give the bill the honour that it deserves and pass it," Finance Minister P Chidambaramsaid in reply to the debate on the bill. The Pension Fund Regulatory and Development Authority (PFRDA) has been functioning under executive authority since it was set up in 2003. 

The PFRDA runs the New Pension System, a retirement scheme for central government employees started in January 2004 that is now open to private individuals and also state governments. The scheme is mandatory for all central government employees who joined service from January 1, 2004. It is not applicable to armed forces. 

The scheme now has nearly 53 lakh subscribers and a corpus of Rs 35,000 crore. 26 state governments have also joined the scheme. "...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. The bill benchmarks FDI in the sector to that in insurance, implying 26% limit right now that could be revised to 49% if the insurance bill goes through. 

The government has accepted all but one of the recommendations of the Standing Committee on Finance on the subject to get abroader support for the bill. 

"There is enough structure in place in NPS that funds will be managed well and safely. NPS gives better returns than EPS. The returns are more than government bonds. Returns are quite adequate," Chidambaram said on the issue of safety of investments. 

The Pension Bill was first introduced in March 2005, but could not be passed by the last Lok Sabha. It was reintroduced in 2011. The bill allows some withdrawal from the NPS to make the scheme more attractive to subscribers. The PFRDA could later notify schemes that provide a certain minimum assured return. (Economic Times)