New Delhi: The long-pending Pension Bill, a key economic legislation assuring minimum returns to subscribers, was on Wednesday approved by the Lok Sabha, with the government saying it is based on the principle that "you save while you earn".
The Pension Fund Regulatory and Development Authority (PFRDA) Bill, 2011, provides for market based returns and wide coverage based on several investment options in the pension sector with an aim to building confidence in the subscribers.
It will have provision for withdrawals for limited purposes from Tier-I pension account, an incentive for subscribers to join the New Pension Scheme (NPS).
Replying to a brief debate, Finance Minister P Chidambaram said the government has accepted most of the recommendations of the Standing Committee.
The NPS, beneficial for employees in the long run, is based on the principle that "you save while you earn" especially for retirement period and is mainly for those who have a regular income, he said.
The corpus of the NPS having 52.83 lakh subscribers (including those of 26 state governments) was about Rs 35,000 crore.
The bill also seeks to grant statutory status to the Pension Fund Regulatory and Development Authority.
"....Rs 35,000 crore should not be used by unstatutory authority...All this Bill does is make unstatutory authority (into) a statutory authority," Chidambarm said, adding the statutory authority will have powers to penalise.
The bill would also provide subscribers a wide choice to invest their funds for assured returns, like opting for government bonds as well as in other funds depending on their capacity to take risk.
The subscriber seeking minimum assured returns would be allowed to opt for investing funds in such scheme providing minimum assured returns as may be notified by the Authority.
The bill seeks to empower PFRDA to regulate the NPS.
Further withdrawals will be permitted from the individual pension account subject to the conditions, such as, purpose, frequency and limits.
The bill was referred to the Standing Committee twice -- in 2005 and 2011.
The bill provides for 26 per cent foreign investment in pension sector or as may be approved for insurance sector, whichever is higher. It also provides that at least one of the pension fund managers shall be from the public sector.
The legislation also provides for establishment of a vibrant Pension Advisory Committee with representation from all major stakeholders.
PFRDA was established by the government in August, 2003. The government through an executive order later in October mandated PFRDA to act as a regulator for the pension sector. The mandate of PFRDA is development and regulation of pension sector in India.
The Standing Committee recommendation which has not been accepted relates to repayable advance, as according to the government, it will convert the account into an overdraft account.
The NPS has been made mandatory for all the central government employees (except armed forces) entering service with effect from January 1, 2004. It has been launched for all citizens of the country including unorganised sector workers, on voluntary basis, from May, 2009.
In order to effectively invest and manage huge funds belonging to a large number of subscribers and to ensure the integrity of NPS, creation of a statutory PFRDA with well defined powers, duties and responsibilities is considered absolutely necessary and would benefit all NPS subscribers, the Finance Ministry later said in a statement.
Earlier, participating in the debate Shailendra Kumar (SP) opposed the Bill saying there was no provision to provide assured returns to the employees.
Ministers Kamal Nath and Kapil Sibal approached SP chief Mulayam Singh Yadav apparently to seek his party`s backing to the bill, which the Left parties staunchly opposed.
The SP member, along with those from Trinamool Congress, DMK and the Left parties, opposed the measure on several counts, especially on putting the "social security moneys" in the volatile stock market and allowing FDI to manage these "hard-earned" funds.
Sougata Roy (TMC) wanted the Chair to ensure that the bill, which would affect lives of millions of people, should not be passed in a hurry and in din over missing coal ministry files and hike in petroleum prices.
Interestingly, Gurudas Dasgupta (CPI) called back the protesting Left members from the Well as Roy was speaking to oppose the bill.
TKS Elangovan (DMK) said his party opposed the measure because the hard-earned savings of the people would be invested in private securities.
Sanjay Nirupam (Cong) supported the bill saying it would go a long way to help the aged in their post-retirement life.
Opposing it, Basudeb Acharia (CPI-M) wondered as to what was the need for having the new bill related to pension reforms.
"This (bill) is taking away the right of workers and employees...It is anti-labour and will create two classes of employees," he noted.
Supporting the bill, Nishikant Dubey (BJP) said government has agreed to certain demands of the Opposition including capping the FDI in pension sector at 26 per cent.
Dara Singh Chauhan (BSP) said that dual pension system is creating dissatisfaction among employees.
Bhartruhari Mahtab (BJD) said that NPS is a sound vehicle for having corpus for old age people.