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CII wants to open up pensions market
Monday, 14 July 2003, 19:30 IST
NEW DELHI: A leading industry lobby has urged the Indian government not to put any restrictions on the number of players seeking to enter the pension market as it would restrict the choice for consumers.
"Limiting the number of players would impede growth in the pensions market and would restrict the spread and choice of products available to the consumer," the Confederation of Indian Industry (CII) said in a statement Sunday.
With the Indian population ageing rapidly and the number of people above the age of 60 expected to be close to nine percent of the population by 2016, the CII feels there is urgency for pension reforms.
This is all the more important as state-run schemes for employees in the organised sectors cater only to a small percentage of people.
"The present Employees Provident Fund (EPF) and Employees Pension Scheme (EPS), though laudable, cater to only 11 percent of the workforce in the organised sector. Presently, the pensions products of the life insurance players cater to the unorganised sector," the CCI has pointed out.
Further, the cost to the exchequer on account of the government pension schemes is "immense and cannot be sustained in the long run".
While pension reforms are urgent, it is also imperative to keep in mind the effectiveness of the reform initiatives, states CII.
Given the tremendous potential of the pensions market, CII feels that it is necessary to have many strong and willing players in a country like India where the market is huge.
On the issue of credibility of the potential participants, CII has suggested that this could be addressed through suitable entry criteria that may be prescribed by the appropriate authority.
The industry body has pointed out that most of the life insurance companies have a significant proportion of their business coming from individual pension segment as well as group gratuity and super-annuation.
In 2002-03, the business underwritten by the private life insurance players in the individual pension category increased by 27 times and the number of policies exhibited an increase of 88 percent.
"It will be pertinent to note that the promoters of life insurance companies, including large overseas companies are proceeding on the basis of business plans that include pension business. The capital injections in their part reflect their anticipation and potential in India," the CII states.
Another concern raised by CII regarding the ongoing pension reforms is the possible proposal of setting up of a Central Record Keeping Agency (CRKA) for all the players in the pensions market.
"The setting up of a CRKA would significantly diminish the ability to provide innovations in service standards. For instance, presently many life insurance companies offer their pension account holders the facility to access their accounts and switch between funds without the intervention of a third party.
"This invaluable service would be lost by the setting up of a CRKA, as it would require that all transactions are processed through CRKA," the CII states.
The role of a CRKA should be restricted to the government pension funds, states the industry lobby.
Source: IANS
Source: IANS