English Release 22-May 2013
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Ministry of Finance22-January, 2007 20:25 IST
|Government to adopt investment pattern of Non-Government Provident Funds for NPS Funds as an interim model|
17 STATES NOTIFY DEFINED CONTRIBUTION PENSION SYSTEMS
FM ASSURES STATES OF AMENDMENT IN PFRDA BILL TO PROVIDE OPTION FOR 100% INVESTMENT OF PENSION FUNDS IN GOVERNMENT SECURITIES
|Government of India introduced the New Pension System (NPS), for new entrants to services in the Central Government (other than the Armed Forces) with effect from 1st January 2004.This is a fundamental shift from the earlier defined benefit system. However, this applies to only one category of the Indian workforce. The larger goal is to provide a system of old age income security, available to all. In order to give the NPS a statutory basis and to put in place a regulator with statutory powers, Government introduced the Pension Fund Regulatory and Development Authority Bill, 2005.
The Bill has since been recommended by the Standing Committee on Finance with certain amendments which are being considered by Government.
Pending the enactment of the Bill, the Pension Fund Regulatory and Development Authority will be appointing a central record keeping agency (CRA) for Central Government servants under the NPS. In the interim, Government is also in the process of finalizing an arrangement for investment of funds accumulated under the NPS on the pattern for non-government provident funds etc.
Following in the footsteps of Government of India, 17 States have also notified similar defined contribution (DC) pension systems for their new employees. Many of these States are looking to the Centre for further guidance in implementing the new system.
To discuss these issues, the Ministry of Finance convened a conference of Chief Ministers and State Finance Ministers today. The conference was presided over by the Prime Minister.
The majority of the State Government participants generally welcomed the move towards a fiscally sustainable pension system for civil servants and the establishment of an old age income security system for all Indians. Some States that have not yet notified DC pension systems informed that they would do so when the Bill is passed and the NPS architecture is made available.
Many of the State representatives urged Central Government to expeditiously pass the PFRDA Bill and to put in place the record keeping, accounting and investment architecture, as employees under the new system are getting only an administered interest rate and are being deprived of the better returns offered by market based instruments.
The States of Kerala, West Bengal and Tripura reiterated their opposition to the defined contribution system and also to the interim model proposed to be adopted by Central Government for investment and management of NPS funds.
The Finance Minister assured the participants that the PFRDA Bill will be amended to provide an option for investing 100% of pension funds in government securities, entrusting the job of fund management initially only to public sector fund managers etc. He also mentioned that to educate citizens about the NPS and to enable them to take informed decisions, literature on the subject of pension reforms would be widely disseminated by PFRDA in regional languages. PFRDA would allow States that have implemented the DC system to avail of the services of the CRA which will be appointed by PFRDA. It will also strengthen regulations to protect funds from mismanagement. The investment pattern for non-government provident funds, while conservative and restrictive, would be adopted as an interim model, pending the passage of the PFRDA Bill.
Concluding the deliberations, FM stated that the concerns expressed in today’s conference would be taken note of in the amendments to the PFRDA Bill. Furthermore, consultation with the political parties would continue to evolve a consensus in Parliament before the Bill is taken up for consideration and passing.
(Release ID :24259)