The proposed pension legislation would go a long way in enhancing pension cover and provide much-needed social security to the country's citizens, industry body CII said today.
"We believe the reform will go a long way in increasing the coverage of formal pension and social security plans in India where only around 12 per cent of active workforce has any formal pension or social security plan," CII Director General Chandrajit Banerjee said.
The long-pending Pension Bill, a key economic legislation assuring minimum returns to subscribers, was today 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.
"With increasing life expectancy and the changing fabric of traditional family structure, a clear roadmap for deepening of pensions and annuity market remains critical for ensuring old age financial security," Banerjee said.
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).
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.
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.
A 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.