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Government may hike FDI limit in pension sector to 74 percent; Bill likely in monsoon session

Amendment to Pension Fund Regulatory and Development Authority (PFRDA) Act, 2013 seeking to raise FDI limit in the pension sector may come in the monsoon session or winter session depending on various approvals, sources said.

April 11, 2021 / 01:35 PM IST
Sources say the amendment Bill may contain separation of the National Pension System Trust from the PFRDA

Sources say the amendment Bill may contain separation of the National Pension System Trust from the PFRDA

The government may hike foreign direct investment (FDI) limit in the pension sector to 74 percent and a Bill in this regard is expected to come in the next Parliament session, according to sources.

In March the Parliament approved a Bill to increase FDI limit in the insurance sector to 74 percent from 49 percent. The Insurance Act, 1938 was last amended in 2015 which raised FDI limit to 49 percent, resulting in foreign capital inflow of Rs 26,000 crore in the last five years.

Amendment to Pension Fund Regulatory and Development Authority (PFRDA) Act, 2013 seeking to raise FDI limit in the pension sector may come in the monsoon session or winter session depending on various approvals, sources said.

Currently, the FDI in the pension fund is capped at 49 percent.

Besides, sources said, the amendment Bill may contain separation of the National Pension System Trust from the PFRDA.

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The powers, functions and duties of the NPS Trust, which are currently laid down under the PFRDA (NPS Trust) Regulations 2015, may come under a charitable trust or the Companies Act, they said.

The intent behind this is to keep NPS Trust separate from the pension regulator and managed competent board of 15 members. Out of this, the majority of members are likely to be from the government as they, including states, are the biggest contributor to the corpus.

The PFRDA was established for promoting and ensuring the orderly growth of the pension sector with sufficient powers over pension funds, the central recordkeeping agency and other intermediaries. It also safeguards the interest of members.

NPS was introduced by the Centre to replace the defined benefit pension system. NPS was made mandatory for all new recruits to the central government service from January 1, 2004, (except the armed forces in the first stage) and has also been rolled out for all citizens with effect from May 1, 2009, on voluntary basis.

The government had made a conscious move to shift from the defined benefit, pay-as-you-go pension scheme to defined contribution pension scheme, NPS, due to rising and unsustainable pension bill. The transition aimed at freeing the limited resources of the government for more productive and socio-economic sectoral development.
PTI
first published: Apr 11, 2021 01:35 pm

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