Five facts on FDI in pension sector

The government on Thursday opened up the pension sector to foreign investment. Against the expected cap of 29 per cent, the Cabinet cleared up to 49 per cent foreign investment in the sector.

1. The PFRDA Bill allows part investment of the person's pension investment in the stock markets. This is the most contentious of all the reforms measures taken by the government as in case of the markets tanking the amount is expected to be lost. No clarity has come from the government on this account.

2. The original PFRDA Bill had no provisions pertaining to FDI. However, the Standing Committee on Finance, headed by senior BJP leader Yashwant Sinha, suggested FDI in the sector, but with a cap of 26 per cent. The Cabinet on Friday went a step ahead and approved 49 per cent FDI in the sector.

3. The Bill provides powers to the Pension Fund Regulatory and Development Authority (PFRDA) to oversee multiple pension funds in the country. It means that the authority will get statutory backing, which would enable it to monitor the players more effectively.

4. The new measures are expected to bring in more players in the sector. However, the amount would not be as huge as in the case of insurance sector. The moves comes at a time when a majority of life insurers are suffering from expense overrun and are in dire need of fresh capital infusion. It may be noted that most of India's 24 insurance companies have lost money in the past 10 years, largely due to restrictions on foreign holding.

5. The pension sector is in nascent stages in the rural areas. With FDI being allowed, it is expected to provide life-time earnings for people in rural areas as well.