"Pension sector has immense potential and within five years, it will emerge as the second largest within the financial sector after banking," joint secretary (capital markets and pension) U K Sinha said at a seminar on pensions, organised by India Invest Economic Foundation.
In order to exploit the potential within the sector, the government favours multiple pension fund managers for the segment with investors having the flexibility in switching from one PFM to another, he said.
Sinha, however, added the proposed regulator Pension Fund Regulatory Development Authority would take a final call on the number of pension fund managers to be allowed, the investment guidelines and the minimum capital to be maintained by the fund managers.
Pointing out that majority of the pensions are still from the government sector, he said at least one fund manager will be from the public sector and the PFMs would offer broadly three schemes - equity, balanced and debt plans - depending on the age and risk appetite of the investors.
However, before allowing PFMs, a Central Record-keeping and Accounting agency would be set up and it would serve as the nerve centre for the proposed defined contribution scheme, where both employers and employees would equally contribute 10 per cent of basic pay and dearness allowance.