LS clears pension bill, foreign investors can hold 26% stake Law Aims At Social Security For Pvt Sector TIMES NEWS NETWORK New Delhi: After nearly a decade, the Lok Sabha finally cleared the pension bill that paves the way for individuals to plan for their post-retirement needs and allows foreign investors to acquire up to 26% stake in the sector. The Pension Fund Regulatory and Development Authority (PFRDA) Bill was passed by the lower House after some tough political negotiations that included the government accepting a crucial suggestion made by the parliamentary standing committee on finance headed by the BJP’s Yashwant Sinha. The government agreed to stipulate that the pension regulator will ensure that fund managers offer at least one product with an assured minimum return to protect investors from market volatility. The investment option will be in addition to the schemes that are already available. The schemes on offer give investors the choice to invest up to 50% in shares that offer higher returns but are riskier. Alternatively, they can invest only in government bonds. HOW DOES NPS WORK? If you are between 18 and 60 yrs, you can get a Permanent Retirement Account Number from entities like SBI, UTI, ICICI Bank and Axis Bank Minimum annual contribution Rs 6,000. Fees much lower than those charged for pension plans sold by insurance companies Choose fund manager from 8 players. More players can come in now with up to 26% foreign investment allowed. At least one fund manager to be from public sector You can choose from a mix of equity, debt and gilts. Now, the govt has agreed to a new scheme that will offer minimum assured return NPS gives you flexibility of changing fund manager, investment mix annually At 60, you can withdraw up to 60% of corpus but need to use at least 40% to buy annuities that will earn a monthly pension No tax will be levied if entire corpus is used to buy annuities PM gets BJP to back key bills W ith Parliament stalled over his refusal to take questions on Coalgate, PM Manmohan Singh on Wednesday met senior BJP leaders and invoked a possible crisis over Syria to urge them to let bygones be bygones and allow the House to function. His plea saw the BJP agreeing to the passage of key bills on land acquisition, budget-related demands and conversion of an ordinance enhancing Sebi’s powers into law. P 10 Bill unlikely to lure investors In return, the BJP agreed to the proposal to allow foreign investors acquire up to 26% stake in the sector with the rider that the ceiling will go up if a similar cap for insurance is raised to 49% as has been suggested by the government. With the passage of the bill, the government is hoping to make a stronger pitch to attract investment and boost sagging sentiments. But investors are unlikely to be lured as global conditions still remain fragile and there is no progress on the insurance legislation which again has been pending for years. The pension bill, which still needs to be approved by the Rajya Sabha, provides for statutory backing to PFRDA, the pension regulator, and helps it frame rules and levy penalties. Currently, it regulates the National Payment System (NPS) through a trust that has entered into agreements with fund managers, points of presence that collect money from subscribers, and record-keepers. The NPS has a corpus of Rs 35,000 from nearly 53 lakh subscribers, a majority of whom are government employees. “The immediate impact is that it will help provide better regulation of the sector as it will give the regulator powers…it will provide more confidence to investors and will have a positive impact,” PFRDA chairman Yogesh Agarwal told TOI after the Lok Sabha passed the bill. Several individuals from the private sector have shied away from the NPS due to lack of clarity over its future. Although government employees moved to a contributory pension mechanism from 2004, it wasn’t until 2008 that the NPS actually became operational with the appointment of fund managers for private sector and other infrastructure in place. The government offers little by way of social security to those working in the private sector with the Employees’ Pension Scheme being the only option for those subscribing to the Employees Provident Fund. The EPS covers only a small fraction of the population as a majority of people are part of the unorganized sector. The NPS is seen as the lowest-cost option for retirement planning. “The enactment of a law will strengthen the market and help people save for old age in a cost-efficient manner,” said Balram Bhagat, head of UTI Retirement Solutions.
Posted on: Thu, 05 Sep 2013 02:31:46 +0000
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