With the approval of the Rajya Sabha, Parliament on Friday passed the much- awaited key economic reform legislation, the Pension Fund Regulatory and Development Authority (PFRDA) Bill.
The Upper House passed the Pension Bill with 115 members in favour and 25 members against it.
Interestingly, arch rivals in West Bengal - the Left parties and Trinamool Congress - joined hands to oppose the Bill. The Bill, which opens the doors to 26 per cent Foreign Direct Investment (FDI) in pension funds, was already passed by the Lok Sabha. It now goes to President Pranab Mukherjee for his assent.
The Bill, once signed by the President, will provide statutory authority to pension regulator - the Pension Fund Regulatory and
Development Authority. At present, it has non-statutory status. The Bill has been hanging since 2005 when it was first introduced in Parliament. It was reintroduced in 2011. Replying to the debate on the Bill in the Rajya Sabha, Finance Minister P Chidambaram said that the government had accepted all, but one of the recommendations of the Standing Committee on the subject.
“At present, saving for retirement by people is very low in the country,” he said.
The New Pension System (NPS), aiming to promote “saving while you earn” especially for retirement, is mainly for those who have a regular income.
The Finance Minister underlined the need to make the Pension Fund Regulatory and Development Authority (PFRDA) a statutory authority as it is managing the corpus of Rs 35,000 crore belonging to 52.83 lakh subscribers including those of 26 state governments.
“All this Bill does is to make a non-statutory authority a statutory authority,” he said. PFRDA was established by the government in August 2003. He also clarified that if a government employee dies prematurely, his family would get the pension benefits that prevailed prior to 2004.
Referring to security of funds and returns, Chidambaram said, “There is enough structure in place in the NPS that funds will be managed well and safely. The NPS gives better returns than the EPS (Employees’ Pension Scheme). The returns are more than government bonds. Returns are quite adequate.” To a query on bringing down the employee’s annual contribution from Rs 6,000, Chidambaram said, “This is not a large amount. Given the current salary and possibility of the 7th Pay Commission in two years, a saving of Rs 500 per month is feasible.”
The NPS has been made mandatory for all the Central Government employees (except armed forces) entering service with effect from January 1, 2004. It has been launched for all citizens including unorganised sector workers, on a voluntary basis, from May 2009.