Even if the pension bill has not been tabled in Parliament, global pension fund managers have started assessing the Indian market. CNBC-TV18 finds out what's attracting these funds to India.
A large majority of Indian workforce, 89 per cent in fact work in the unorganised sector and this huge catchment of about 400 million is attracting global pension giants.
A pension bill is likely to be tabled in Parliament this winter session. But, even though this bill may give global pension funds very little leeway, sources say that big funds like Calpers, Principal, New York Life, Fidelity, Liberty Mutual, Prudential US, Scottish widows, Zurich Armymen and Nomura have already made their preliminary assessment of the market.
Even companies like AIG, Met Life and New York Life who already have insurance tie ups in India are keen to set up individual pension fund companies. So why this rush of foreign players eyeing the Indian market when there is no clarity on FDI norms for pension funds?
Ashwin Parekh, Executive Director of Ernst & Young says, "Compared to all other markets available elsewhere, financial asset availability at reasonable rate of return is possible in this market. Therefore, these are attractive markets to set up pension fund companies."
The draft pension bill limits FDI in pension companies to 20 per cent to 26 per cent, similar to insurance companies in India. Only public sector companies like SBI, UTI and LIC may be allowed to set up pension funds and global players may have to look at collaborating with them to set up pension fund companies.
Global pension players are attracted to the unorganized working population in India, as this class of workers is not covered under any kind of social security system. They are either self employed or casual workers. So the potential to sell pension plans by assuring attractive returns is huge.