NEW DELHI: The government could raise the limit on foreign direct investment in the pension sector to 74 percent, and a bill on this is expected at the next session of parliament, according to sources.
Last month, Parliament approved a bill to raise the foreign direct investment limit in the insurance sector from 49 percent to 74 percent. The Insurance Act of 1938 was last amended in 2015, raising the foreign direct investment limit to 49 percent, resulting in an inflow of foreign capital of Rs 26,000 over the past 5 years.
The 2013 amendment to the Pension Fund Regulatory and Development Authority (PFRDA) Act, which aims to raise the FDI limit in the pension sector, may come in the monsoon or winter session, depending on approval.
Foreign direct investment in the pension fund is currently limited to 49 percent.
In addition, sources suggest that the draft amendment could separate the NPS Trust from the PFRDA.
The powers, functions and duties of the NPS Trust currently set out in the National Pension System Trust (PFRDA) 2015 regulations could fall under a charitable trust or the Companies Act.
The intention behind this is to separate NPS Trust from the pension regulator and the competent board of directors led by 15 members. That being said, the majority of the members are likely to come from the government, since they, including the states, make the largest contribution to the corpus.
The PFRDA was established to promote and ensure the orderly growth of the pension sector with sufficient powers through pension funds, the central recording agency and other intermediaries. It also protects the interests of the members.
The National Pension System (NPS) was introduced by the Indian government to replace the defined benefit pension system. The NPS was made compulsory for all new recruits in the central government service (with the exception of the armed forces in the first phase) from January 1, 2004 and was introduced on a voluntary basis for all citizens with effect from May 1, 2009.
Due to rising and unsustainable pension bills, the government made a conscious decision to switch from the defined benefit pension system to the NPS defined contribution pension system. The transition aimed to free the government’s limited resources for more productive and socio-economic sectoral development. PTI DP ANZ
