New Delhi, July 26: The government has been urged to bring in a system where private pension funds give subscribers the option of parking their savings in government securities instead of the stock or debt markets.

This suggestion was made in a report tabled by a Parliamentary standing committee, which also pegs the foreign investment ceiling in the pension sector at 26 per cent.

The committee has shown a preference for fund managers who guarantee a fixed return. The report said a major concern for employees was the lack of a pension system which guaranteed returns without risks.

“The new pension system leaves the retirement benefits to be determined by the market,” the report said.

The panel has advised the government to make “available to subscribers the option of 100 per cent investment of pension funds in government securities”.

This, committee members said, was done to address the fear that pension subscribers will be left high and dry if their money is invested in the stock market and it eventually collapses close to their retirement date.

The six pension funds, including five private and one state-run fund, which will enter the sector under the proposed law will invest pension money in stock and debt markets where returns are uncertain.

The committee said the government was open to the idea of “giving preference to pension fund managers who guarantee returns”.

The committee also said “decisions relating to permitting FDI in the pension sector and deployment of pension funds outside the country should in no way be in variance with related provisions applicable to the insurance sector”.

The standing committee also asked the government to come to Parliament with a separate pension legislation for the unorganised sector.

The demand has been made to assuage feelings of Left members, who, led by CPI leader Gurudas Dasgupta, have sent dissent notes opposing the bill and inflow of FDI into the sector.

Pitching for flexibility in withdrawal, the report has recommended that subscribers be allowed to take one repayable advance from their accounts upon completion of 15 years of service and also permanently withdraw up to 50 per cent of his contribution after 25 years of service to meet exigencies.

The proposed PFRDA bill totally ignores the early withdrawal point.

The committee wants to safeguard investor interests and has recommended that representatives of employees associations and subscribers should be co-opted into advisory committees to be set up by the PFRDA.

The committee has also asked the government to spell out the capital adequacy and other norms for pension funds in the PFRDA bill itself just as it had in the IRDA bill. This was done in response to criticism at committee meetings that the government was trying to delegate legislative powers to the PFRDA by allowing it to make rules on most issues related to the pension sector without refering to Parliament.