The Pension Fund Regulatory and Development Authority (PFRDA) has urged corporates to question the Employees Provident Fund Organisation (EPFO) on the legal basis on which they try to prevent their exit.
The regulator added that more fund managers would be appointed to manage the National Pension System (NPS).
"There is no legal basis on which EPFO can compel a corporate to continue with it after joining. Corporates should question EPFO as to what legal provision gives it the authority to prevent their exit," PFRDA chairman Yogesh Agarwal told IANS.
He said EPFO has taken a stand that a corporate cannot exit after joining it.
With minimum salary levels going above Rs. 6,500 per month, many corporates do not come under the scheme to enroll with EPFO. Meanwhile, EPFO has reduced fresh memberships.
According to Agarwal, 820 corporates have joined NPS in the last couple of years and the numbers are growing.
"There are 150,000 individual accounts and the 820 corporates' corpus is Rs.1,500 crore," he said.
Agarwal said NPS-corporate model also provides a platform to the corporates to co-contribute for employee's pension and enables the employer to outsource the administrative, record-keeping and fund management functions to NPS at no additional burden.
But the one disadvantage the scheme suffers from is that it is yet to achieve the tax equivalency of other financial products like employees provident scheme, public provident fund and others which have - exempt-exempt-exempt (EEE)- tax status whereas NPS is subject to tax at the end of the period.
"When the direct tax code (DTC) comes into effect, there will be a level-playing field for NPS in respect of tax incentives," Agarwal added.
Queried about expanding the number of fund managers from the current eight, Agarwal said the regulator was considering two-three applications.
He said in five years' time, PFRDA will be self-sufficient regarding its fund needs and will not need government assistance.
"The sector is small and hence our licence fee is also meagre. In four/five years, we will be financially independent of the government," Agarwal said.
According to him, the pension corpus regulated by it is doubling every year. The NPS has around 5.2 million subscribers and a corpus of Rs. 35,000 crore.
On the Swavalamban Yojana scheme under which the centre contributes Rs. 1,000 per annum to all eligible NPS account holders, Agarwal said there are more than two million subscribers with Rs. 600 crore assets under management.
Of these subscribers, 950,000 are from the southern states with Karnataka accounting for 380,000 and is followed by Andhra Pradesh with 250,000 beneficiaries.
Agarwal said the government incentive was available till 2016-17 and the central government was thinking of extending the period further.