PFRDA seeks to regulate all pension products

Including ones sold by insurance and MF entities; is consulting FinMin

The Pension Fund Regulatory and Development Authority (PFRDA) is in talks with the Union finance ministry to regulate all pension products, including those floated by mutual fund (MF) and insurance companies.

“We are in discussion to regulate all pension plans,” said Hemant Contractor, chairman of PFRDA, at an event organised by Morning Star, an MF tracking agency.

The move could trigger a tussle with the Securities and Exchange Board of India (Sebi) and the Insurance Regulatory and Development Authority of India (Irdai). Currently, pension products floated by fund houses and insurance companies are regulated by Sebi and Irdai, respectively.

A similar controversy had arisen between Sebi and Irdai over the regulation of unit-linked investment plans (Ulips). In 2010, Sebi barred 14 life insurance companies from selling or renewing Ulips unless these were registered with it. Irdai directed the Sebi order be ignored, saying the capital markets regulator had no jurisdiction over insurance companies. The matter was settled when the government issued an ordinance reinstating Irdai jurisdiction over Ulips.  

In this case, PFRDA is avoiding a direct conflict by consulting the ministry, based on provisions in the PFRDA Act. “Since (the) Act empowers (us) to regulate all kinds of pension business in India, we have sought a clarification from the government if we can regulate the pension schemes offered by asset management companies (AMCs) and life insurance companies,” said a senior PFRDA official.   The Irdai annual report said the insurance sector had 17 per cent or Rs 3.4 lakh crore worth of its assets in pension-linked insurance products. Currently, only three AMCs manage pension funds -- UTI MF, Franklin Templeton AMC and Reliance MF.

Assets under management of the National Pension System (NPS) are Rs 1.1 lakh crore and subscribers are more than 10 million. This is despite NPS not enjoying the exempt-exempt-exempt (EEE) tax benefit accorded to other financial products such as Public Provident Fund and Employees PF.

PFRDA has been asking for the same tax treatment, to make NPS more attractive. An EEE tax regime provides exemption on the invested amount, the interest earned from the investment and also an exemption on the total income earned from the investment.

Contractor also said PFRDA was taking various measures to popularise pension products in the organised sector. It is set to launch an online facility for prospective customers.