International Financial Services Centres Authority (IFSCA) has received the report from the Expert Committee on ‘Development of Pension Products at GIFT IFSC’. Chaired by Prof. Mukul Asher, the committee’s focus was on designing pension products for global citizens, especially NRIs and OCIs, emphasizing portability and tax efficiency. The proposed products aim to provide long-term savings options regulated by IFSCA, catering to the diverse needs of NRIs with features like nomination and tax-efficient accumulation and withdrawal phases. IFSCA will draft regulations based on the committee’s recommendations to facilitate these cross-border pension schemes at GIFT IFSC, enhancing retirement planning flexibility for global Indians.
IFSCA
INTERNATIONAL FINANCIAL SERVICES CENTRES AUTHORITY
PRESS RELEASE
Report of the Expert Committee on Development of Pension Products at GIFT IFSC submitted to IFSCA
The Expert Committee on ‘Development of Pension Products at GIFT IFSC’ has submitted its report to the Chairperson, IFSCA, on Monday, July 08, 2024.
The Expert Committee was constituted by IFSCA to identify the scope of providing pension products targeting global citizens, with special emphasis on NRIs and OCIs and to explore a possible regulatory framework for the same. Under the Chairmanship of Prof. Mukul Asher (Former Professor at the Lee Kuan Yew School of Public Policy at the National University of Singapore), the Committee has recommended a non-INR denominated long-term savings product to be regulated by IFSCA.
Hon’ble Prime Minister at the inauguration of Pravasi Bharatiya Kendra in 2016 had said:
“Entire world today is keen to engage with India. And our diaspora can play a major role in furthering the country’s bond with the world. At the same time, it is also necessary for us to connect and strengthen our bond with the diaspora”
There are over 13.5 million NRIs and 18.7 million PIOs living in various parts of the world. The pension products would provide portability and nomination (succession plans) features for the NRI investors.
The Committee has recommended a detailed product design emphasising each stage of the product. The report recommends a comprehensive regulatory framework that strikes a balance between encouraging voluntary participation and safeguarding the interests of the contributors. The Committee has also analysed the tax design and proposed a tax framework with crucial recommendations to make the product attractive.
In the process of making its recommendation, the Committee engaged with multiple stakeholders and beneficiary groups and has conducted a comprehensive review of voluntary pension products from various jurisdictions internationally.
IFSCA will be drafting the pension product regulations based on the report of the Expert Committee.
The report of the Expert Committee can be accessed on IFSCA Website at https://tinyurl.com/2e3zkbwj
July 08, 2024
Gift City, Gandhinagar
Executive Summary of Report of the Expert Committee on Development of Pension Products at GIFT IFSC submitted to IFSCA
Retirement planning is a critical aspect of financial security, yet it poses a unique challenge for global citizens, especially Non-Resident Indians (NRIs) and global citizens. The global workforce landscape has dramatically shifted, with more individuals than ever before relocating across borders for employment opportunities. This mobility, while advantageous for career growth, introduces complexities in managing retirement savings due to the diverse pension fund legislations and tax regimes encountered in different jurisdictions. Understanding these differences is crucial for NRIs and expatriates to ensure a stable and secure retirement.
The primary challenge in saving for retirement as an NRI or expatriate is the lack of pension fund portability. Every country has its own set of rules and regulations governing pension funds, which can significantly differ from one jurisdiction to another. These differences can lead to complications when attempting to transfer pension savings from one country to another, often resulting in reduced savings and potential financial insecurity during retirement. The disparities in tax laws further complicate this issue, as individuals may find themselves subject to double taxation or unable to avail of tax benefits due to their nonresident status.
In response to these challenges, the Gujarat International Finance Tec-City (GIFT) International Financial Services Centre (IFSC), under the aegis of the International Financial Services Centres Authority (IFSCA) offers a beacon of hope. Established as a global financial and IT services hub through an Act of the Indian Parliament namely the International Financial Services Centres Authority Act, 2019 (IFSCA Act), IFSCA aims to bridge the gap in the market for financial services that cater specifically to the needs of the global Indian community, including innovative retirement solutions that address the issues of portability and tax efficiency.
IFSCA is proposing to create an enabling regulatory ecosystem where the GIFT IFSC-based financial service providers will be able to offer cross-border voluntary pension schemes as a solution to the challenges faced by NRIs and expatriates. To make these schemes attractive, these pension products need to be designed to be flexible, allowing for the accumulation of retirement savings in a tax-efficient manner that is not hindered by cross-border employment. The ability to contribute to a single pension scheme from anywhere in the world simplifies the retirement savings process, ensuring that individuals can maintain a consistent approach to their retirement planning regardless of their country of employment.
It is envisaged that during the accumulation phase, the retirement plans offered by the pension service provider will provide a wide range of investment options. From equity and debt instruments to more sophisticated investment vehicles, these plans allow individuals to tailor their investment strategy according to their risk tolerance and financial goals. This flexibility ensures that NRIs and expatriates can maximize their retirement savings, taking advantage of growth opportunities in various markets.
Approaching retirement, the focus shifts towards the decumulation phase, where the accumulated savings are converted into a steady stream of income. Therefore, the pension products to be offered should offer various options to manage this phase, including phased withdrawal plans, annuities, or a combination of both. These options provide retirees with the flexibility to choose how they wish to receive their retirement income, ensuring it aligns with their personal needs and financial circumstances.
The retirement plans to be offered by the pension product providers from GIFT IFSC shall stand out for their tax efficiency, allowing individuals to maximize their savings by minimizing tax liabilities. The portability of these plans shall ensure that NRIs and global citizens can move freely across borders without worrying about the implications for their retirement savings. Moreover, the flexibility in investment and withdrawal options shall cater to the diverse needs of the NRIs and global citizens, providing a tailored approach to retirement planning.
Navigating the complexities of retirement planning is a daunting task for NRIs and global citizens. However, with the innovative solutions provided by GIFT IFSC, there is a pathway for achieving financial security in retirement. By addressing the challenges of pension fund portability and tax efficiency, GIFT IFSC’s retirement plans should offer a comprehensive solution that can adapt to the unique needs of the global Indian community. As the world becomes increasingly interconnected, the importance of such flexible, portable retirement planning solutions will only grow, positioning GIFT IFSC as a pivotal player in the future of retirement savings for global citizens including NRIs.
