New Delhi: Faced with a deadlock over Pension Fund Regulatory and Development Authority (PFRDA) Bill due to stiff opposition from Left parties, the government is contemplating to bring a separate bill on pension funds for private sector employees.
“In case, Left parties are not convinced with the proposed Pension Bill, the government may consider introducing a separate bill in Parliament on pension funds for private sector. On this, they have not expressed any opposition,” a finance ministry official said.
The Pension Bill, on which Parliamentary Standing Committee has also given its report, is pending in Parliament due to opposition from the Left parties, he added.
Pending the passage of this bill, the Centre and most state governments have decided on an interim measure for the defined contribution-based New Pension Scheme (NPS) for employees recruited since January 2004.
Now, an option would be given to employees to park up to five per cent of the fund in stock markets. Interim pension regulator PFRDA is in the process of selecting pension fund managers for this fund by next month.
At present, around 20 states have given their consent to the move to manage around Rs 1,800 crore pension funds of the government employees.
The government is worried that in the absence of any legislation, pension funds worth over Rs 2,00,000 crore run by public and private sector insurance companies are prone to high risks of the stock market. There are more than 10 pension products in the market.
Most insurance companies, whether state-owned LIC or private sector players like ICICI Prudential, Bajaj Allianz Life, Aviva Life or HDFC Standard Life, are increasingly focusing on pension products.
Since under Income Tax Act, investment in Pension Funds are exempted from income tax, a large number of employees are investing in these schemes from insurance companies.
As per industry estimates, the premium collected from pension plans by insurance companies has grown from around Rs 1,000 crore eight years ago to a whopping Rs 2,22,268 crore.
Market analysts have warned that in the absence of legal framework, a part of these funds could be invested in high-risk stocks, putting hard earned income of employees in danger.