New Delhi, Sept. 3: The government has decided against taking decisions on two vital issues in its pension fund scheme — the ceiling on foreign investments to be allowed in pension funds and the amount of money these funds will be allowed to park abroad.
“We intend to leave these two crucial decisions to the interim pension regulator,” said U. K. Sinha, a top finance ministry official.
The government has given an in-principle permission to foreign fund managers to enter the market and to park funds abroad. However, it intends to leave the two crucial decisions to the regulator, Sinha clarified today. Many of the leading global pension funds have shown keen interest in entering India, the official said.
The ability of the regulator to take independent decisions on these two vital issues could well depend on political resistance building up to the new pension schemes announced by the government.
Labour minister Sahib Singh Verma today expressed reservations over provisions on safeguarding investor funds, minimum returns guarantees and provisions for family pensions even though he added that he would abide by the cabinet decision on allowing new privately-run pension funds.
The proposed scheme did not provide any safeguards for investors and against any mismanagement by private fund managers or any guarantee on the minimum and family pensions, Verma said addressing a seminar, jointly organised by the India Invest Economic Foundation and Assocham.
Verma cited the Chilean model, based on which the new pension scheme had been framed, saying there were problems in entrusting pension funds to private hands as that always had an element of risk and the country could face political problems.
The minister said there was no provision for family pension in the proposed scheme and it “clearly brought out the lack of basic protection if the bread-earner of the family passed away”.
Many from within the BJP are also arguing that the government should cap FDI in pension funds at 26 per cent — just as the insurance sector — while disallowing or closely restricting parking of Indian pension receipts abroad.