The Hindu Business Line : `New pension system to have sizeable subscriber base'

THE PENSION Fund Regulatory and Development Authority (PFRDA) has pegged the number of people interested in joining the new pension system in the near term at 20-30 million.

With an almost equal number keen to sign up in the next couple of years, the new system will soon have a sizeable base of subscribers, Mr D. Swarup, Chairman of the PFRDA, said here on Tuesday.

So far, 15 States have joined the system — Maharashtra being among the latest — and others are expected to follow suit in the foreseeable future, he added.

The pension regulator is currently trying to address a few major issues, including those related to the structure of pension fund management companies, central record-keeping and the number of players who will be allowed to offer their services.

"We will not be tied down by the number of fund managers," Mr Swarup told newspersons while referring to an earlier proposal to limit the number to six. Another proposal on allowing the current crop of asset management companies to act as pension fund managers is yet to be finally considered.

As for mandating a central record-keeping agency, the PFRDA is aware that a number of players are interested. These include the depositories, National Securities Depository Ltd and Central Depository Services (India) Ltd. No decision on the matter has been taken so far.

Earlier, addressing a symposium hosted by the Financial Planning Standards Board, the PFRDA chairman indicated that a "section of the political spectrum" is not in favour of the pension reforms, marked as these are by defined contribution (as opposed to defined benefit). Hopefully, Parliament will approve the pension legislation, he felt.

"Pension funds are among the richest in the world... if the experiment succeeds in India, they will do well here too in terms of assets under management," Mr Swarup said, adding that PF managers will offer four schemes. The latter will include one that will be 100 per cent government-securities oriented, and another that will allow up to 50 per cent investment in equities.

The PFRDA has sought public opinion on capital adequacy requirements. Some suggestions have referred to a possible scenario in which a pension fund manager brings in a capital of Rs 100 crore. These and other proposals will be considered in due course.

"The challenge meanwhile is to cover a lot of people who have little access to alternatives and wean them away from traditional systems," the PFRDA Chairman said. Tax incentives are not the only condition that should prompt subscribers to sign up, he added.

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