Indian government has started universal social security pension scheme with effective from 1.1. 2004. This National Pension System is to ensure the pension after the retirement as well as pension provided to people belonging to unorganized sector. The employees must have NPS account and for other people it is optional. For overseeing the pension wealth and keeping in investments as per the guidelines there needs an authority. Government of India set up PFRDA for that purpose. PFRDA was set up through an executive order at first, but later the bill is passed in Parliament.
This bill is first introduced into Lok Sabha on 24 March 2011. This attempt is made to make PFRDA as a statutory body which was earlier made through executive order. This was sent to be referred Standing committee on Finance to look into and needed proposals to make it better. However, it was reported by standing committee on 30August 2011. At last, Lok Sabha passed the bill approving the recommendations by committee on 4 September 2013. Rajya Sabha passed the bill after two days i.e. 6 September 2013. Thus so long awaited bill turned into act providing statutory status to PFRDA to oversee and develop as well as regulate the pension sector of India.
Recommendations of standing committee on Finance
When the bill was put forward, the standing committee made recommendations on PFRDA bill 2011. The recommendations are as follows. Every individual can withdraw a part of amount of his accrued money in Tier-1 NPS account. But, it can be taken under conditions as specified by the act. Among the Pension Fund Managers, there should be at least one public sector institution. It is going to provide a wide choice of investment options. It also recommended that there should be an advisory council to give advice on regulations of PFRDA act. It is also suggested that there should be minimum guarantee regarding the pension at the time of retirement.
PFRDA composition and duties
PFRDA consists of a chairman and five members. Among them, three shall be whole timers. They are appointed by the government of India. The present chairperson is Yogesh Aggarwal. The duties of PFRDA are to regulate pension sector. Hence, it has to oversee the pension wealth garnered through National Pension System. 10% of basic pay and dearness allowance of every employee of India deducted and deposited in their Permanent Retirement Accounts. This is the amount of pension to be taken care of along with the common men who belong to the unorganized sectors also contribute to their accounts. PFRDA takes measures to develop the pension sector of India. It has to provide retirement income to the subscribers. It has to promote security to the pension wealth not falling into wrong hands and ensure old age income. Its every action should be in the interests of subscribers. The pension sector regulator PFRDA sets up a trust to oversee the pension wealth garnered by NPS. PFRDA appoints the trustees of the trust to oversee the pension wealth and respective work.
National Pension System Trust
This trust is established by PFRDA on 27 February 2008. PFRDA sets up a trust and appoints trustees to this trust to carry on the work related to National Pension System. This trust is managed by a board and this board consists of trustees. Among the trustees, one member is selected as chairman of the board. Another trustee is chosen and appointed as Chief Executive Officer. The CEO is responsible to manage the trust and has to carry out administration of trust. The current board of NPS trust is of six members and one among them is CEO and another among them is chairman and four of them are trustees. The objectives of trust are to supervise the Pension Fund Managers. It will converse with trustee bank i.e. Bank of India and record keeping agency i.e. NSDL and with Stock Holding Corporation of India Limited etc. The trust can make agreements with agencies to carry on its duties. The trust oversees whether the pension wealth is properly invested and not giving any undue advantage to any person or organization and oversees whether the work is going on according to the rules and regulations. Its main aim is to save the interests of subscribers. The trust reviews the work of pension fund managers and regularly evaluates the performance of these and suggests the amendments for improvement of efficiency.
Pension Fund Managers
PFRDA the regulator of pension sector appoints a trust to oversee the National Pension System garnered pension wealth and the trust oversees the work of pension fund managers. Three fund managers are presently managing the government employees' pension wealth. They are SBI Pension Funds Private Limited, UTI Retirement Solutions Limited; LIC Pension Fund Limited Seven Pension Fund Managers are managing the funds of unorganized sector. They are SBI Pension Funds Private Limited, UTI Retirement Solutions Limited, ICICI Prudential Pension Funds Management Company limited, Kotak Mahindra Pension Fund Limited, Reliance Capital Pension Fund Limited, LIC Pension Fund Limited, HDFC Pension Management Company Limited.
Few critics point out that it cannot be called a welfare programme as it is not assured by the government that it will surely provide better pension wealth. It always face the vagaries and troubles of market and it is very risk if one wants to get more profit and at the same time he may lose in stock markets if they fall as happening whenever the international bourses fall. Few also point out that it has very long lock-in period during which no one can get access to the accumulated money. In detail, a person cannot get access to money till his retirement. At the same time, few points out that government must assure that there should be minimum pension wealth even vagaries take place. After few observations, it is found that the risk high investments are providing more interest or profit worth 15% whereas most secured government bonds are generating extra 2% of total value. There is a lot of difference.
No responses found. Be the first to comment...