Government might hike pension plan FDI restriction to 74%

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The federal government might hike international direct financial investment limit in the pension sector to 74 per cent and also a bill hereof is expected ahead in the following Parliament session, according to sources.

Last month, Parliament accepted a Bill to raise FDI restriction in the insurance industry from 49 percent to 74 per cent. The Insurance Act, 1938 was last modified in 2015 which elevated FDI restriction to 49 per cent, leading to foreign capital inflow of Rs 26,000 crore in the last 5 years.

Amendment to Pension Fund Regulatory and Development Authority (PFRDA) Act, 2013 looking to elevate FDI restriction in the pension market may be found in the monsoon session or wintertime session relying on different authorizations, sources claimed.

Currently, the FDI in the pension fund is restricted to 49 percent.

Besides, sources stated, the amendment bill may include separation of NPS Trust from the PFRDA.

The powers, functions and also responsibilities of the NPS Trust fund, which are presently set under the PFRDA (National Pension System Trust) Rules 2015, might come under a philanthropic trust fund or the the Companies Act, they claimed.

The intent behind this is to keep NPS Trust separate from the pension plan regulatory authority as well as managed proficient board of 15 members. Out of this, most of participants are most likely to be from the government as they, consisting of states, are the most significant factor to the corpus.

The PFRDA was developed for promoting as well as making certain the orderly growth of the pension plan sector with enough powers over pension funds, the central recordkeeping agency and also various other intermediaries. It also safeguards the interest of members.

The National Pension System (NPS) was introduced by the Government of India to replace the defined benefit pension system. NPS was made mandatory for all new employees to the central federal government service from January 1, 2004, (except than the military service in the first stage) as well as has actually likewise been presented for all people with effect from May 1, 2009, on voluntary basis.

The federal government had made a conscious move to shift from the specified advantage, pay-as-you-go pension plan scheme to defined contribution pension system, NPS, because of rising and unsustainable pension plan expense. The change focused on freeing the restricted sources of the federal government for extra productive and socio-economic sectoral growth.

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