The Hindu Business Line : For whom the bell tolls

Responding to demographic shifts is among the biggest challenges of the present century. Timely, therefore, is a new publication from the Institute of Chartered Accountants of India (www.icai.org), Pension Plans. It covers `key issues relating to various pension schemes.'

The Institute is also working on `further initiatives' such as the development of Guidance Note and standards on the accounting/auditing aspects of pension plans. The ICAI President, Mr T. N. Manoharan, in the foreword, speaks about training members in pension, and coordination with the PFRDA (Pension Fund Regulatory and Development Authority).

Apt, therefore, it was that the Institute ensured the release of the publication, last week, by D. Swarup, Chairman, PFRDA. He had emphasised the need for pension reforms, by pointing out how the pension bill of the Central and State Governments put together stood at about Rs 65,000 crore, and was rising at a compounded annual growth of 21 per cent.

"If the Sixth Pay Commission comes, then the liability is going to go up to a level of Rs 75,000-Rs 80,000 crore. There will come a time when the entire government budget would be spent in salaries and pensions of government employees," he'd said. A frightening scenario, that is.

"The existing mandatory and voluntary private pension system is characterised by such limitations like fragmented regulatory framework, lack of individual choice and portability and lack of uniform standards apart from the problem of limited coverage," writes Anuj Goyal, Chairman of the ICAI's Committee on Insurance and Pension, in his preface to the book.

Accounting for pensions is governed by Accounting Standard (AS) 15, `Employee Benefits'. This AS advises the use of `unbiased and mutually compatible actuarial assumptions' about: demographic aspects such as mortality and employee turnover, and also financial points (as for example, discount rate and future salary/benefit levels). One of the transitory measures in the AS is about deferring expenditure towards termination benefits `over its payback period', till the end of the decade.

Chapter 12 is on `the role of CAs in pension plans,' which comes with a caveat: That `the anticipated role' of the ICAI's members `has to be played within the ethical framework of the Institute'. The book foresees that professional accountants will find a foothold in the following areas: Strategic services, financial accounting and investment operations, expense management, corporate governance, designing pension products, management of portfolio, and pension marketing.

On the last avenue — pension marketing — the ICAI states: "Though this domain belongs to small savings and insurance agents, CAs, because of their superior knowledge and the ability to render services can enter into agreements with insurance companies to function as Direct Sellers of their products."

Which means, the next insurance salesman at the door may well be a CA.

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