Lok Sabha on 4 September 2013 passed the Pension Fund Regulatory and Development Authority Bill (PFRDA), 2011, with official amendments. The Bill (PFRDA) was introduced in the Lok Sabha on 24 March 2011 to provide a statutory regulatory body to the Pension Fund Regulatory and Development Authority (PFRDA) under the provisions of the Bill. This legislation also seeks empowerment of PFRDA for regulation of New Pension System (NPS).
The PFRDA Bill 2011 was referred to the Standing Committee on Finance on 29 March 2011 for examination and report and the committee submitted its report on 30 August 2011.
Few of the key recommendations of the Standing Committee on Finance:
• Minimum assured returns would be allowed to the subscribers, who seek the minimum assured returns in the schemes that provides minimum assured returns notified by the Authority
• Withdrawals will be permitted from the individual pension account subject to the conditions, such as, purpose, frequency and limits, as may be specified by the regulations
• The foreign investment in the pension sector at 26% or such percentage as may be approved for the Insurance Sector, whichever is higher
• At least one of the pension fund managers shall be from the public sector
• To establish a vibrant Pension Advisory Committee with representation from all major stakeholders to advise PFRDA on important matters of framing of regulations under the PFRDA Act
The Bill also seeks making of the PFRDA as a statutory authority, at present it is termed as the non-statutory status. The National Pension Scheme would be designed on the principle of you save while you earn and will mainly aim to cater to the people with regular income.
Subscribers will also get a choice to invest their funds (also assured returns) in the government bonds as well as the other funds depending upon their capacity to take risk.
The New Pension Policy was made mandatory for employees of Central Government (excluding the armed forces), who have entered the services after 1 January 2004 and it has also been notified in 26 states for their employees. It can be accessed by each and every citizen of India that includes unorganized sector workers on voluntary basis and it came into effect on 1 May 2009.
Swavalamban Scheme has been launched by the Government of India to encourage people from the unorganized sector to voluntarily save for their retirement. The scheme was launched in 2010-11 budget.
Constitution of the statutory PFRDA is felt necessary to effectively invest and manage the huge funds that belongs to a large number of subscribers and to ensure the integrity of NPS. As the number of subscribers noted on 14 August 2013 under NPS was 52.83 lakh and the total corpus of 34965 crore. The defined powers, duties and responsibilities of NPS would help the subscribers of NPS to reap maximum benefits.
The PFRDA Bill authorizes the PFRDA to establish a Pension Advisory Committee by notification under Clause 44 of the PFRDA Bill, 2011. The Pension Advisory Committee would be responsible for advising the Authority on the matters related to the making of the regulations under the ambit of the PFRDA Act.
Market based returns and wide coverage based on several investment options in the pension sector will build up the confidence in the subscribers, whereas withdrawals for limited purposes from Tier-I pension account will be an incentive for them to join NPS.
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