The Union Cabinet is likely to consider amendments to Pension Fund Regulatory and Development Authority (PFRDA) Act, 2013 soon and a Bill in this respect may be introduced in the upcoming session of Parliament, sources said. The amendment Bill may contain provisions on separation of NPS Trust from PFRDA, hike in foreign direct investment (FDI) limit for the pension sector to 74 per cent from the existing 49 per cent, among others, sources said.
In March, Parliament approved a Bill to increase FDI limit in the insurance sector from 49 per cent to 74 per cent. The Insurance Act, 1938 was last amended in 2015 which raised FDI limit to 49 per cent, resulting in foreign capital inflow of Rs 26,000 crore in the last 5 years.
With the amendment, sources said, powers, functions and duties of NPS Trust, which are currently laid down under PFRDA (National Pension System Trust) Regulations 2015, may come under a charitable Trust or the Companies Act. The intent behind this is to keep NPS Trust separate from the pension regulator and managed competent board of 15 members. Out of this, the majority of members are likely to be from the government as they, including states, are the biggest contributor to the corpus.
Finance Minister Nirmala Sitharaman had announced to separate NPS Trust from PFRDA with appropriate organisational structure, keeping in view the wider interest of the subscribers and to maintain arm’s length relationship of NPS Trust with the regulator.
The Trust was established by PFRDA for taking care of the assets and funds under NPS. The proposal to separate the two job roles has been under consideration for the last couple of years. PFRDA was established for promoting and ensuring the orderly growth of the pension sector with sufficient powers over pension funds, the central record keeping agency and other intermediaries. It also safeguards the interest of members.
The National Pension System (NPS) was introduced by the government to replace the defined benefit pension system. NPS was made mandatory for all new recruits to the central government service from January 1, 2004, (except the armed forces in the first stage) and has also been rolled out for all citizens with effect from May 1, 2009, on voluntary basis.
The government had made a conscious move to shift from the defined benefit, pay-as-you-go pension scheme to defined contribution pension scheme, NPS, due to rising and unsustainable pension bill. The transition is aimed at freeing the limited resources of the government for more productive and socio-economic sectoral development.
PFRDA, which runs two flagship schemes NPS and Atal Pension Yojana (APY) under its fold, is targeting to reach an AUM (asset under management) of Rs 7.5 lakh crore by the end of the current fiscal year. The authority also aims to add another 10 million (1 crore) subscribers by the end of March 2022.