INDIA: Government to push for pension bill in next session of Parliament

NEW DELHI (The Hindustan Times), August 11, 2008: By Sandeep Singh, The government will push for the passage of the Pension Fund Regulatory and Development Authority Bill, which seeks to create an old-age income security system, in the upcoming monsoon session of Parliament, a senior official involved in the process said on Monday. The bill was introduced in lower house of Parliament in 2005 and would lapse if it is not passed within three years, a deadline that ends with upcoming session. According to a Rajya Sabha member from the Bharatiya Janata Party, this is the only reform legislation that stands a chance of getting passed, as barring the Left few are opposed to it. Work on the bill was initiated when BJP was in power. Unlike other proposed legislations such as those on more liberal insurance and banking laws, this "bill has gone through all the required channels, now only is waiting for the Finance Minister to ask the speaker to move the bill,” said the official involved in the matter. The official did not wish to be named because of the sensitive nature of the issue. The bill was presented in March 2005 and was subsequently discussed and cleared by the relevant parliamentary standing committee and other groups, including the the Cabinet. Proponents of the the bill say it will bring a sea-change to the retirement planning of the individuals incorporating the informal sector in the chain now waits for the political will. “We want and hope that the bill gets passed,” said Sudip Bandyopadhyay, CEO, Reliance Money. “It will open investment of the pension money into the financial market that can optimise returns and cover them against high inflation levels.” But leftist unions warn they will work to block the bill. “Unless they have the numbers they won’t bring it on the floor,” said W.R Varada Rajan, secretary of the CPI(M)-affiliated Centre of India Trade Unions. “All those who voted in the trust vote may not necessarily be wiling to vote for the bill,” he said. What It Means * Bill seeks to create an old-age income security system. * It will facilitate setting up of pension funds for workers in the unorganised sector that employs the bulk of India's workforce. * It will pave the way for a regulator that will set rules for selection of fund managers and their modus operandi, oversee operation of pension funds and provide redressal of any grievances. * Employees would get more investment options, including as much as 15% in equities. * Employees will be able to move from one pension to another at zero cost. * They will be able to decide their debt-equity allocations. * For those who do not choose, there will be a 'default option,' based on life cycle approach, that takes age and risk into account. TWENTY PERCENT OF HOUSEHOLD SAVINGS IN LONG-TERM INSTRUMENTS Out of every rupee of household savings, no more than Rs. 0.20 goes towards long-term savings, according to IIMS Dataworks. On 10 percent people save and invest keeping wealth creation in mind, and miniscule numbers contribute their own money to retirement savings schemes. The only popular long-term savings products for smaller investors with annual savings less than Rs.10,000 are life insurance savings plans and 19 percent of total annual household savings is devoted to such products. If the PFRDA Bill becomes law, these anomalies would get corrected. Copyright HT Media Ltd.