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Hyderabad , Dec. 8

THE much-awaited Pension Fund Regulatory and Development Authority (PFDRA) is scheduled to take off from January 1 next year offering defined contribution schemes to the newly-recruited Central Government staff, the Joint Secretary in the Union Ministry of Finance, Mr U.K. Sinha, announced here on Monday.

Addressing the representatives of the insurance industry here at the Eighth Insurance Summit, Mr Sinha said, "A resolution was issued by Government on October 10 constituting an interim PFRDA. It is expected that the new pension system would be functional from January 1, 2004."

The process of setting up of a Central Record-keeping and Accounting Agency and Pension Fund Managers (PFMs) would be completed in the next three to four months. Till the time these are in place, an interim arrangement was being put in place, he said.

Allaying fears on entrusting the job of PFMs to mutual funds alone, Mr Sinha said the insurance companies would also be allowed to act as PFMs under the guidelines of PFDRA. Further, the insurance companies would also be allowed to continue to offer the existing pension schemes in terms of the guidelines issued by the Insurance Regulatory and Development Authority (IRDA), he said.

Ruling out the inter-connectivity problems between the two regulators, Mr Sinha said "the efforts of the Government will be for a well coordinated approach in which all the regulators and the Government are in the picture and concerns of various segments of the industry are taken into account. We have a mechanism called high-level coordination committee for the financial and capital market. The RBI Governor chairs the committee and it has as its members the SEBI Chairman, the IRDA Chairman and the Finance Secretary. This committee will address the issues, which require inter-regulatory coordination and clarification."

The new comprehensive pension system was based on defined contribution, shared equally in the case of Government staff between the Government and employees. Under the scheme, there would be no contribution from the Government in respect of individuals who are not its employees. The new pension scheme would be portable, allowing transfer of the benefits in case of change of employment and would go into `individual pension accounts' with pension funds.

According to Mr Sinha, the objective was to design a pension scheme for new entrants in Central Government service where the contribution was defined, where no extra infrastructure was sought to be created and which was capable of serving other groups like State Government employees (to be decided in future), middle class self-employed and even those in the lower income bracket amongst the unorganised sector subsequently.

Stating that the Government has decided to allow several pension fund managers to offer three basic schemes - safe, balanced and growth, Mr Sinha said one of the PFMs would be in the public sector. The Government has also decided to withdraw the existing provisions of GPF for new entrants.

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