The government has decided to leave it to the proposed pension regulator to decide the number of fund managers, the foreign funds that can be invested abroad and also set the foreign investment limit for the sector.
Senior government officials said that the regulatory body -- Pension Funds Regulatory and Development Authority -- is expected to be set up through an executive order by the end of the month and new government recruits can shift to the contributory pension model earliest by January next year. They added that before notifying the regulatory body, the government would also have to decide on an agency to maintain records.
"We hope to put in place the regulatory body through an executive order by the end of the month. But the earliest the contributory system can be put in place would be in January next year," an official said.
Officials also said that the guidelines for fund managers will be a mix of those in place for insurance companies and mutual fund. They said no decision had been taken on the extent of foreign investment level that will be permitted in the sector.
The finance ministry was earlier planning to cap foreign investment in fund management companies at 26 per cent, in line with the prevailing limit in case of insurance companies. It had also proposed that six fund managers, of which one will be state-owned, will be permitted.
The fund managers were to be selected through a global tender process. On Saturday, the Union Cabinet cleared a proposal to set up the PFRDA through an executive order and shift the all new government recruits, barring defence personnel, to shift to contributory pension scheme.
Government employees will now have to shell out 10 per cent of their salary as contribution to pension funds.
While exiting the scheme on attaining the age of 60, those who have opted for the scheme would be required to spend 40 per cent of their realisation from the pension fund in purchasing an annuity plan from an insurance company.
The cabinet also decided to permit each pension fund manager to offer three schemes -- safe, balanced and growth.
In the case of safe income plans, while at least 60 per cent of the funds at disposal of the fund manager would have to be invested in government securities, upto 30 per cent of the funds can be invested in corporate debt papers and the rest in equity instruments.
Under the balanced scheme, at least 40 per cent of the funds would be channelised into government securities, a maximum 40 per cent in corporate debt and the upto 20 per cent in equities.
In case of growth schemes, 25 per cent investment would be mandated for government securities, 25 per cent in corporate bonds and the balance 50 per cent in equities markets.
The interim PFRDA, will be headed by a chairman, who will be of the rank of secretary in addition to four members.
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