The government may increase the FDI limit in the pension sector to 100 percent, and a bill in this regard is expected in the next Parliament session. This move will be in line with the insurance sector, where up to 100 percent FDI is allowed. Last year, Parliament had approved a bill to increase the FDI limit in the insurance sector from 74 percent to 100 percent. The Insurance Act, 1938 was earlier amended in 2015, after which the FDI limit was increased from 49 percent to 74 percent.
Provision to separate NPS Trust from PFRDA
Sources said that the bill to amend the Pension Fund Regulatory and Development Authority (PFRDA) Act, 2013 with the aim of increasing the FDI limit in the pension sector may come in the monsoon session or winter session depending on various approvals. At present, the FDI limit in pension funds is set at 49 percent. Apart from this, sources said that there may also be a provision in the amendment bill to separate the NPS Trust from the PFRDA.
He said that the powers, functions and duties of the NPS Trust—which are currently prescribed under the PFRDA (National Pension System Trust) Regulations, 2015—can now come under the ambit of a charitable trust or the Companies Act. The objective behind this is to keep the NPS Trust separate from the pension regulator and ensure its management by a competent board of 15 members. Most of these members are likely to be from the government, as the government, including the states, is the largest contributor to the corpus.
When was NPS started
PFRDA was established to promote and ensure the orderly development of the pension sector, with substantial powers over pension funds, the central record-keeping agency and other intermediaries. It also protects the interests of the members. National Pension System (NPS) was introduced by the Government of India to replace the ‘defined benefit pension system’. NPS was made mandatory for all new employees joining central government services from January 1, 2004 (the armed forces were exempted from it in the initial phase), and it has also been extended to all citizens on a voluntary basis from May 1, 2009. In view of the rising and unmanageable pension bill, the Government had taken a conscious step of shifting from the ‘Defined Benefit, Pay-as-You-Go’ pension scheme to the ‘Defined Contribution’ Pension Scheme (NPS). The purpose of this change was to free up the government’s limited resources for more productive and developing socio-economic sectors.
