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Big names lining up for pension pie

Sarbajeet K. Sen

The enormous size of the insurance market can be gauged by the estimate made by the Insurance Regulation And Development Authority (IRDA) which put the aggregate size of the pension market at Rs 4,06,000 crore at the end of year 2025 from the Rs 56,100 crore at the time of the presentation of its report on pension reforms in late 2001."We have been getting queries from several parties interested in the pension business here," a senior Finance Ministry official said.

NEW DELHI, April 10

HECTIC market moves have started for an assault on the multi-crore-rupee pension market with several existing big names in life insurance and asset management businesses knocking at the Government's doors to vie for the market pie.

A host of major players in these areas have been making queries at the Ministry of Finance to assess the Government's plans for bringing about a structured pension system.

These include international names such as Principal Financial Group, ING group, Metlife, Prudential and State Bank of India.

While the latter four have ongoing tie-ups in the Indian life insurance market, the Principal Financial Group, which is the largest player in the US pension market, has recently tied up with Punjab National Bank and Vijaya Bank for its asset management business and to later make a foray into the life insurance sector.

"We have been getting queries from several parties interested in the pension business here," a senior Finance Ministry official said.

Insurance industry officials who are keenly watching the developments said that the Indian market offered a highly lucrative business proposition for international pension players.

The enormous size of the insurance market can be gauged by the estimate made by the Insurance Regulation And Development Authority (IRDA) which put the aggregate size of the pension market at Rs 4,06,000 crore at the end of year 2025 from the Rs 56,100 crore at the time of the presentation of its report on pension reforms in late 2001.

The tussle for a foothold in the pension arena is expected to be intense with the Government having decided to put a cap on the number of players that would be allowed in the initial stage.

Thus, the proposed pension fund regulatory authority (PFRA), which is to be set up shortly, would be doling out licences to a maximum of six players initially.

With one of the six players to be a public sector entity, tentatively named as Pension Corporation of India (PCI), there would be space left for five private players who would be allowed to become pension fund managers. Officials said that the exercise to finalise the structure for PCI was on in full steam, with several options being weighed.

"We are looking at all options including a joint venture, a subsidiary of an existing company or an entirely new set-up," they said.

As per the initial plans for the new pension system, the six PFMs selected would have to restrict their products to a bouquet of three scheme each — growth, balanced and safe, with different level of risks associated with each of the schemes. The highest risk would go along with the growth scheme since it would allow the maximum equity investment from its corpus.

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