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
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
Indeed, mutual fund subscribers are warned that investments in
stock market instruments are subject to market risk.
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.