Friday, 5 October 2012

Official Amendments to PFRDA Bill, 2011

The Union cabinet these days approved the introduction of some important official amendments to the Pension Fund regulatory and Development Authority Bill, 2011. These official amendments are necessitated in sight of the recommendations of the committee on Finance that has examined the Bill. Supported the recommendations of the committee on Finance, the govt have set to simply accept the following:

1. that the subscriber seeking minimum assured returns shall be allowed to choose finance his funds in such schemes providing minimum assured returns as could also be notified by the Authority;

2. withdrawals not surpassing twenty five per cent of the contribution created by subscriber is permissible from the individual retirement savings account subject to the conditions, like purpose, frequency or limits, as could also be specified  by rules by the Pension Fund regulatory and Development Authority (PFRDA)

3. the foreign investment ceiling within the pension sector at twenty six per cent or such proportion as could also be approved for the Insurance Sector, whichever is higher could also be incorporated within the current legislation;

4. to determine a vivacious Pension advisory Committee with representation from all major stakeholders to advise Pension Fund regulatory and Development Authority on vital matters of framing of rules under the PFRDA Act.

5. the membership of the PFRDA are confined to professionals having experience in economics, finance or law solely.

The New Pension scheme (NPS) has been created necessary for all the Central Government staff (except Armed Forces) getting into service with impact from 1st January, 2004.1.2004. Twenty seven State / UT Governments have notified NPS for their staff. NPS has been launched for all individual citizens of the country as well as unorgnised sector employees, on voluntary basis, with impact from first might, 2009. Further, to encourage individuals from the unorganised sector to voluntarily other than their retirement, Government has introduced the co-contributory pension scheme titled "Swavalamban Scheme" within the Budget of 2010-11. As on seventh Sept, 2012 the quantity of subscribers under NPS is around 38 lakh with a corpus of around Rs. 20500.00 crore.

In order to effectively invest and manage such large funds own to an oversized quantity of subscribers and to make sure the integrity of the New Pension Scheme, creation of a statutory Pension Fund regulatory and Development Authority with well specified powers, duties and responsibilities are taken into account completely necessary and would be beneficial to all NPS subscribers.

The official amendments to the Bill are moved within the next session of the Parliament.

Background:

The following recommendations of the SCF haven't been accepted:

• As regards the advice of SCF for mandatory insurance of the funds of subscribers by pension fund managers, a provision has already been created within the PFRDA Bill, to safeguard the interest of the subscribers by guaranteeing safety of contribution of subscribers and conjointly by keeping the operational expenses under control,

• As regards the choice of pension fund managers in such a way that one third of all such fund managers are from the general public sector, since a provision has already been created within the PFRDA Bill that a minimum of one in every of the pensions fund shall be from the general public sector that sets a floor, the ceiling may be any variety supported objective criteria.

The Pension Fund regulatory and Development Authority Bill, 2005 was at the start introduced within the Lok Sabha in March, 2005 to supply for a statutory PFRDA. However, since the Bill and also the official amendments, supported the recommendations of the standing committee on Finance, couldn't be thought of by the Lok Sabha, and also the Bill lapsed on dissolution of the fourteenth Lok Sabha. The govt had declared within the Budget 2011-12 that the revised PFRDA Bill would be moved in Parliament. Consequently, the PFRDA Bill, 2011 was introduced within the Lok Sabha on the twenty fourth March, 2011 to produce for a statutory regulatory body, the PFRDA below the provisions of the Bill. The legislation wanted to empower FRDA to control the New Pension System (NPS). The PFRDA Bill, 2011 was mentioned the committee on Finance on the twenty ninth March, 2011 for examination and report on that. The standing committee on Finance gave its Report on thirtieth August, 2011. Supported the recommendations of committee, a cabinet Note, to introduce further recommendations of the committee on Finance was moved on nineteenth December, 2011. Since the PFRDA Bill, 2011 was postponed within the Winter Session of the Lok Sabha, so the cabinet Note was withdrawn.

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