What may be the thought that crosses a keen observer's mind at the sight of an elderly man, slim but steady and erect, on his customary evening stroll? What does that erect posture convey? Unmistakably, a support in the twilight of his life! A support that gives a sense of freedom and independence. It may be an apparently small prop but quite a strong one. Similar is the man's monthly pension, presuming that he gets it. This monthly annuity is a small shoot that comes from a heap of treasure—"pension fund". With its incredible size, the fund has the potential to make the economy glow.
Pension funds in India, due to their incredible size, have the potential to play a major role in the country's economy. If channelized, through capital market, into infrastructure, housing and other long-term government projects, the funds could serve as a catalyst for the growth of the economy. "The Pension Fund Regulatory and Development Authority Bill 2005", applicable to government employees joining service on or after January 2004, provides a wide range of options under a "defined contribution" system. Despite the volatility, the returns from equity investment promises to be higher.
This very size, that grows every year, has led the government to think of introducing reforms in the management of pension. Towards this end, the government has initiated a draft bill called "The Pension Fund Regulatory and Development Authority Bill 2005" (PFRDA Bill). The new bill will be applicable to government employees who have joined the service on or after January 2004. The effect of the bill will be a shift of the onus of managing the pension fund from the government to the private asset management experts. This is the essence of the New Pension Scheme better known as NPS. |
