New Delhi: India’s pension fund regulator said on Wednesday he would urge the government, fresh from victory in a parliamentary confidence vote, to push forward with legislation to allow foreign investment in the sector.
At present, three state-run funds and a handful of domestic insurance firms offer pension schemes to Indian employees, but returns are low as they mostly invest in debt.
“We have been waiting for it (reforms). We will take it up with the government,” D. Swarup, chairman of Pension Fund Regulatory and Development Authority, told Reuters. “I do definitely expect the pension Bill to be passed this year. Otherwise, the Bill will lapse and the entire process has to be started afresh.”
Time to act: Pension fund’s regulator D. Swarup. (Photo: Madhu Kapparath / Mint)
A Bill to reform the pension sector was first introduced in Parliament in 2005. But it ran into stiff opposition from Left parties which provided the government with a majority.
The Left withdrew support last month over the nuclear deal with the US, triggering Tuesday’s confidence vote .
Finance minister P. Chida-mbaram said the vote’s result showed the Congress party-led ruling coalition had majority support for reforms and would work with other parties to carry forward pending reforms.
Parliament is due to reconvene in August.
The proposed pensions legislation would allow foreign funds to buy stakes of up to 26% in pension joint ventures with Indian firms, same as that for insurance firms, Swarup said. “The FDI limit in pensions could be raised to 49% once it is raised in the insurance sector,” he added.
New pension funds would be allowed to invest up to 50% of subscribers’ money in equity or equity-linked mutual fund schemes, he said. Once the Bill is passed, a new pension scheme for government workers could be offered to employees in private firms and others.
Since January 2004, newly recruited employees of the Central and 19 state governments contributed about Rs4,000 crore to the new scheme being managed by subsidiaries of State Bank of India, Life Insurance Corp. of India Ltd and UTI Asset Management Co.
“This figure could rise to $300 billion by 2020 with reforms,” Swarup said.