FDI in pension funds is a welcome step for pensioners and the New Pension Scheme would benefit all subscribers, many of whom may have also opted for such schemes in operation in the private sector. How it will benefit a person who has subscribed to both remains to be seen
Last week, finance minister P Chidambaram announced sweeping reforms in terms of Foreign Direct Investment (FDI) in insurance up to 49% (from the existing level of 26%) and set a similar limit in the case of the pension funds.
The stock market reached favourably to both the proposals and the Sensex breached the 19,000 mark to close the day at 19,058. These moves, however welcome they may be to the stock market, are likely to draw both favourable and unfavourable reactions from the public once full data is made public. In fact, both issues are highly debateable.
The finance minister stated that all the five recommendations of the Standing Committee on Finance, which examined the Pension Fund Regulatory & Development Authority (PFRDA) Bill, 2011, have been accepted, without any reservations. Prima facie, the market reacted favourably but is awaiting full details.
Read here about what the PFRDA says about NPS.
In order to implement the New Pension Scheme (NPS) effectively, at the very outset, this has been made mandatory for all employees, except the Armed Forces, who have entered into service on or after 1 January 2004. However, with effect from 1 May 2009, the NPS has been opened to all citizens of the country, which, again, has been welcomed by all.
In due course, it is believed, a statutory PFRDA will be put in place so as to benefit NPA subscribers.
Read more about what ails the New Pension Scheme.
This is a welcome step for pensioners and the scheme would benefit all subscribers, many of whom may have also opted for such schemes in operation in the private sector. How it will benefit a person who has subscribed to both remains to be seen.
While full details of the scheme are expected shortly, the Cabinet-cleared scheme permits the NPS, which seeks minimum assured return, to opt for investing his/her funds in various schemes that may be notified by PFRDA from time to time.
Click here to read more stories by the same writer.
(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce and was associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US. He can be contacted at [email protected].)
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