Pension reforms in India are finally taking place. A new Pension Fund Regulatory Authority (PFRA) is to be set up and six fund managers with three plans each, is announced by the government recently. At the same time, IRDA has announced its Standard Pension Plan in order to bridge the gap. While the reform process is in and more people are expected to be covered, the critical issue that remains is that of fund management.

Pension reforms have been largely talked about by the industry bigwigs for a long time. Especially, after the opening up of the insurance sector and its success the former Insurance Regulatory and Development Authority (IRDA) chairman N Rangachary has been insisting on the need for reform in the Indian pension system. As per the figures only 37 million of 340 million workers (that makes about 11%) of the Indian population is covered by a retirement benefit scheme and there is almost no scheme for the huge unorganized sector in the country. To start the reform process, as a first step, finance minister Jaswant Singh announced a couple of initiatives while presenting the 2003-04 budget.

First initiative is the announcement of a separate regulatory body for the management of pension system called Pension Fund Regulatory Authority (PFRA). The government has restricted the number of players to six with each one offering three different products. Secondly, government has formulated a pension policy for the aged offering 9% returns in which 2% will be subsidized by government. The pension plan is to be offered by Life Insurance Corporation of India (LIC).

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