PFRDA asks govt to give tax incentives, expand pension cover

The government should consider giving tax incentives to pension sector and expand its coverage to include people in the informal sector as they do not have any universal social security net, PFRDA Chairman Hemant G Contractor said today.
"We have sought parity in any tax treatment for NPS (National Pension System) from the government. Then also waiver of service tax on the purchase of annuity.
"Right now purchase of annuity attracts service tax so we have requested the government to do away with that, these are the two things we have asked the government to consider in the budget proposal", Contractor told reporters on the sidelines of the launch of a report on pension system by FICCI and KPMG.

People in the informal sector are not adequately covered under the pension scheme and something has to be done for this class of customers, Contractor said.
"It is clearly a problem, it has to be addressed. Government alone cannot do this. People below poverty line don't have the capacity to pay for the pension needs, so government financed schemes are must for them. We are discussing with the government to address these issues", he said while delivering the inaugural address.
In India, only about 11-12 per cent of the working population belong to the organised sector and majority of them are well covered by the government pension schemes, he added.

But, the rest 88 per cent belong to the unorganised sector and they are very poorly secured under the pension schemes, he said.

"The problem in unorganised sector is because of the fact that we do not have any universal social security net like in the Western countries", the Pension Fund Regulatory and Development Authority (PFRDA) Chairman said.
The FICCI-KPMG report pointed out the importance of considering higher tax deductions and giving more tax benefits to NPS.
"The survey highlights that pension relate to the existing salary levels and also must protect against inflation post retirement. In terms of tax benefits, it is important to consider higher tax deductions and giving more tax benefits to NPS", said the report.

People living longer life in terms of increased life span
is also one of the factors that has aggravated the situation about pension needs in India, Contractor said.
Besides, he added that inflation is also eating into the savings of the people, the income levels are low in the country and also there is an absence of any state support.
"About 10 per cent of the population in India belong to senior citizen category. It is a looming problem, it is a ticking bomb. The government is cognizant of the problem and it is open for private sector participation in the pension sector", he added.

The PFRDA Chairman also said that pension products should be easy to understand, transparent, portable and be highly regulated.
On the issue of less attraction from overseas players despite opening up of the sector through Foreign Direct Investment, he said the corpus is low to attract investment.
"The corpus is still, although it is Rs one lakh crore, very small compared to the international pension fund markets. Probably, when the corpus grows to Rs 8-10 lakh crore or so, maybe then it will start getting interest", he said.
Further on opening up of NPS scheme for NRI residents, Contractor said PFRDA is going to publicise the scheme overseas.

"Any bank branch abroad can enlist customers, in fact, we have to go and publicise it there. We have been in touch with all the embassies and through them we have been trying to take it forward", he added.
FICCI Secretary General A Didar Singh highlighted the importance of a robust pension system in the country where a significant proportion of the population is bereft of any social security scheme.
"The FICCI-KPMG white paper provides a comparative analysis of employer pension plans like EPF, NPS and Superannuation Funds, and lists factors that have a bearing on growth of these plans."

"We hope that these recommendations would be looked into by the government as providing old age social security is high on the public policy agenda", Singh said.