Sarbajeet K. Sen
New Delhi, Dec. 1
THE door is still open for Indian life insurance companies to enter the pension sector without the need to float a separate outfit for managing pension funds.
The interim Pension Fund Regulatory and Development Authority (PFRDA) is looking at the feasibility of permitting insurance companies to operate their pension business from within their existing set-up once the proposed New Pension System (NPS) gets Parliament's nod.
"We are yet to take a final decision on whether an existing insurer may be allowed to undertake pension business without having to float a separate entity that would act as a pension fund manager (PFM) or whether a separate legal entity would be a must," the Chairman, PFRDA, Mr D. Swarup, told Business Line.
Mr Swarup said that the regulator is studying whether insurance companies would be able to maintain an arms-length with its pension operations should both businesses be allowed to function under the same roof. "We have to see whether the insurance companies would be able to build a Chinese wall between their insurance and pension businesses," he said.
Earlier, there have been apprehension that housing the pension and insurance businesses under the same roof might bring in regulatory complications since the Insurance Regulatory and Development Authority (IRDA) would regulate the insurance business and while the pension business has to comply with the PFRDA's diktat.
Indian insurance companies have been lobbying hard for a long time to be permitted to undertake pension fund management from within their existing set-up. They have been pointing out that most life insurers offer pension products at present.
Moreover, such a structure would also obviate the need for setting aside capital for floating a new entity as Pension Fund Manager (PFM). Industry suggestions for capital requirement for PFMs range from Rs 10 crore to Rs 75 crore. The PFRDA would take a decision on the actual capital requirement for PFMs after Parliament approves the PFRDA Bill.
Under the proposed NPS, pension accumulations and investment would be handled by entities licensed by the PFRDA, while the annuity payment (actual payment of pension) would be done through the registered life insurance companies. Insurers feel that should they be allowed to operate pension business from their existing set-up they would be better placed to provide complete and integrated services to the pension subscriber.Related Stories:
`State Bank, PNB, LIC interested in pension fund management'
`New pension plan can draw 2 crore subscribers initially' Stable, low inflation regime vital, says Rakesh Mohan