The Hindu Business Line : Ministry may allow equity investments by pension funds

The Ministry of Labour may be prepared to consider the proposal of allowing equity investments by superannuation funds, provided all the parties concerned are willing to strike a consensus on the matter.

The Ministry, which is aware of the realities concerning allocations by these funds, has not formed a definite view on whether such funds should be permitted to go beyond the investment norms stipulated by them, Mr Oscar Fernandes, Minister of Labour and Employment, indicated here on Saturday .

The subject of equity investments by funds created for employees has remained quite delicate with some sections fiercely opposing the concept and others rooting for it seriously.

Mr Fernandes, who was addressing a meeting organised by Merchants' Chamber of Commerce (MCC) on Saturday, underlined the significance of greater coverage of workers by the country's pensions system.

The PF infrastructure currently provides retirement benefits to a very small section of the labour force. Most Indians depend heavily on contributions by their families and unorganised savings arrangements.

The Minister, speaking in the context of the gap in coverage, felt there is currently a greater awareness of old age security. The state of affairs, however, is challenged by what are generally considered as two very significant issues - low rate of return and heavy premature withdrawal. Some sections, in fact, are strongly in favour of a revision in the investment pattern for funds so as to increase returns.

Mr Santosh Saraf, President, MCC, said the PF system can be rendered into an effective instrument for providing security in old age (with a view to serve a larger number of people). The provident fund organisation, he added, should be unbundled into distinct outfits in charge of contributions, investment and annuitisation.

While the State should take care of sourcing contributions and providing expert services, asset management should be left to competing fund managers. Also, competing annuity providers should be in place, Mr Saraf noted.

More Stories on : Stock Markets | Pension Plans | Social Security

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
KPIT Cummins to consider stock split

Ministry may allow equity investments by pension funds

Pick a winner contest

Reliance Cap to buy Travelmate

Cairns to await valuation by market in cash cum share swap deal