Daily Special Current Affairs Material for IAS (Pre) 2013 National Issues - Topic: "Nudging Pension Reforms"
Daily Special Current Affairs Material for IAS (Pre) 2013
Chapter: National Issues
Topic: Nudging Pension Reforms
Q. Comment on FDI in pension sector & Pension Fund Regulatory & Development Authority?
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In 2003, the NDA government set up the PFRDA through an executive order. The government is on an even stronger ground in not accepting the recommendation for a guaranteed minimum return to pension fund subscribers.
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The standing committee had wanted pension fund managers to be appointed on the basis of their commitment to generate minimum returns. No prudent investment policy would insist on guaranteed returns from stock market investments.
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Indeed, mutual fund subscribers are warned that investments in stock market instruments are subject to market risk.
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For pension fund subscribers, the time horizon is even longer and the authorities will have to go the extra mile to educate them. Subscribers must be made familiar with the risks and rewards that go with their chosen pension plan, whether the investment is in debt or equity, or in a combination of the two. Once the IPRDA bill becomes law, the New Pension Scheme, which has not made a mark so far, will get a big boost. The opening up of the pension sector will make available large, long-dated funds for infrastructure.
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