he proposed Pension Fund Regulatory and Development Authority (PFRDA) Bill does not ensure guaranteed return to pensioners.
The bill, tabled in Parliament, puts a question mark on the assured return option to pensioners. Pensioners are concerned over the fate of their hard-earned money as the new bill proposes to invest the pension funds in the market. This lacks the social security ingredient as it is subjected to market risks.
The proposed module has been a failure in European countries, say pensioners, but the government appears to be hell-bent on implementing it in India. Suggestions from the Parliament standing committee on finance, headed by former finance minister Yashwant Sinha, have also been ignored.
The bill seeks to set up a statutory PFRDA to promote old age income security and to develop and regulate pension funds in the interest of the subscribers of the schemes and also allows for foreign investment.
The bill will provide legal backing for putting pension funds into stock markets. This is being done despite the experience of 2008 financial crisis.
The two major concerns of the parliamentary committee — provide for an assured return option to new subscribers and a specified FDI cap — have been overlooked by the government.
The Pensioners' Network, which has 3.75 lakh ex-government employees associated with it, has strongly opposed the move. Pensioners' Network general secretary S.C. Maheshwari said that there has to be guarantee on minimum return, a provision which is missing in the bill. The government's proposal to invest the pension funds in market has been a matter of concern for the pensioners.
At present the minimum guaranteed pension is Rs 3,500. He said that the government should continue with the existing pension scheme, though it could be made much more effective. For new employees, the government has started New Pension Scheme (NPS) since 2004, which will come under the proposed regulator.
Maheshwari said that his organisation recently conducted a survey that highlighted the pension scheme failed in European countries, which is similar to the proposed bill in Parliament. "Therefore, the government should take lessons from their failure and avoid implementing it in our country. The basic issue of minimum guarantee should have been incorporated in the bill. We feel that the government is acting at the behest of the World Bank," he said.
The group had organised a protest march on 25 November, in New Delhi, at Jantar Mantar and submitted a memorandum to Prime Minister Manmohan Singh.
Meanwhile, the Left has strongly opposed the government move and has said the bill will deprive lakhs of government employees of their right to get an assured rate of pension at the time of retirement which they have been enjoying. The bill was tabled by UPA-I in 2004 itself, but it could not carry it forward due to stiff opposition from the Left, which was supporting the government at that point of time.
CPI-M's Prasenjit Sen said: "The bill will provide legal backing for putting the pension funds into the stock market. This is being done despite the experience of 2008 financial crisis, which badly hit the Western countries. A large number of employees there found the pension benefits curtailed sharply."
"We completely oppose the provision for 26% FDI in the pension sector. The government is not including this provision in the bill so that it can increase the FDI component in later years without amending the law," he said.