Pension funds can do foreign tango
[ FRIDAY,
The foreign funds would be allowed to own up to 26 per cent stake in entities
that will be set up by state-owned banks, mutual funds and financial
institutions to manage the pension funds, sources said.
The Left parties, which have been opposing the New Pension Scheme (NPS) that
would be based on contribution by the employees, have said that only public
sector entities should be entrusted with the task of managing the pension
funds.
While the government has conceded this demand, it has allowed for FDI in the
entities that will be floated by public sector institutions for the job.
The Pension Regulatory and Development Authority (PFRDA), which has already
appointed National Securities Depository Limited (NSDL) as the central record
keeping agency, has invited preliminary bids to appoint pension fund managers.
Only financial institutions and banks in which government has at least 51 per
cent share and manage assets worth Rs 10,000 crore, can apply.
The sources said the public sector financial institutions will, however, have
to float separate companies for pension fund business.
These companies, which can have up to 26 per cent FDI stake, would need to have
paid up capital of at least Rs 10 crore.
The last date for submitting expression of interest is May 25.
Once the pension fund managers are appointed, PFRDA will allow them access to
the pension funds of employees of central government and state governments,
said a PFRDA official.
He said the NSDL is already in the process of preparing a software, data base
and network connectivity to manage all the funds deposited under the NPS.
It will also give permanent retirement account number (PRAN) to the employees, that could be used by them to contribute and
access pension funds even if they shift from one job to another.
Under the NPS, implemented for all the Central government employees except
armed forces recruited since 2004, employees have to contribute 10 per cent of
their basic salary and dearness allowance, along with a matching contribution
of their employer
The fund manager will offer alternative products to
employees including risk-free options under which funds would be invested in
government securities, and share-market linked products with variable returns
as well, sources said.
Finance Minister P Chidambaram had held meetings with state chief ministers
last year along with Left party leaders on the issue.
Government has claimed that 19 states except three left ruled states -