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Tuesday, Jan 23, 2007
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Pension funds to be invested in stocks also

Special Correspondent

Will fetch superior returns: Manmohan

NEW DELHI : Encouraged by the backing of 19 States even as its Left allies remained stiffly opposed, the United Progressive Government on Monday declared that it would notify an interim investment pattern under the New Pension System (NPS) to facilitate placing five per cent of the funds in stock markets.

Briefing newspersons on the outcome of the "Chief Ministers' conference on pension reforms," chaired by Prime Minister Manmohan Singh here, Finance Minister P. Chidambaram said that apart from facilitating the investment of five per cent of the pension funds in the bourses, the new investment pattern would also provide the option of putting the entire funds in government bonds.

The investment pattern, Mr. Chidambaram stressed, would be interim till the passage of the Pension Fund Regulatory and Development Authority (PFRDA) Bill, pending in Parliament. The first fund manager would be from the public sector.

The Centre has decided to move ahead even as the continuing rift between the UPA and its Left allies over the pension issue came out in the open yet again. This was clear when the three Left-ruled States — West Bengal, Kerala and Tripura — also briefed newspersons on their stance.

While the Left parties are also opposed to the PFRDA Bill, the NDA-ruled States are seeking an expeditious legislation. The Centre, however, is confident of bringing round its Left allies, as their support would be crucial for the passage of the Bill. "We will continue to consult the political parties..." Mr. Chidambaram said, while noting that a consensus was emerging that the Bill should be passed at the earliest, though "of course, with some amendments."

He conceded that three States did express their reservations about the Bill.

The interim notification would include the setting up of a Central record-keeping agency for the NPS.Addressing the conference, Dr. Singh asked the States to cooperate with the Centre for working out new investment avenues for funds under the NPS. "The suggestion being considered is that pending a resolution of all issues related to the PFRDA Bill, these accumulated funds may be allowed to be invested in accordance with the investment pattern prescribed for non-government provident funds."

Dr. Singh stressed the need for better management of pension liabilities so that State finances could be managed in a healthy, sustainable way. He pointed out that the rising pension bills at all levels of the government would be increasingly difficult to finance in future.The pattern, Dr Singh said, would fetch returns superior to those provided by the Government currently, without any compromise on the safety factor.

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