New pension scheme

The Pension Fund Regulatory and Development Authority (PFRDA) will issue investment guidelines, as recommended by the Deepak Parekh Committee, for its mega new pension scheme (NPS) by the middle of this month. “Investment guidelines will be finalised by the middle of the month (April)... May 1 is the date it (pension scheme for all citizens) will be launched,” PFRDA Chairman D Swarup said. The authority is set to launch the pension scheme for all citizens from May 1 after it receives approval from the Election Commission. The committee had suggested to subscribers to invest in the shares of the 50-stock National Stock Exchange’s Nifty, government bonds, liquid assets of mutual funds, state government bonds, rated bonds of public financial institutions and public sector companies, among other things. PFRDA has invited public comments on the recommendations, as well as certain modifications proposed by it to these suggestions. In August 2008, the government advised PFRDA to extend the scheme, currently subscribed to by government employees, to all citizens. Central government employees who joined service on or after January 1, 2004, are covered under the NPS. Unlike the old pension scheme, in the NPS both the employees and the employer (in this case, Government) contribute an equal amount to the pension fund. Twenty-one states have also joined the scheme. However, the NPS for all citizens will not have any mandatory obligation for employers to give matching contributions to the pension fund. When asked about the corpus expected from citizens, Swarup said unlike in respect of the central and state governments, this scheme is voluntary and it would be difficult to predict the growth of the corpus. He, however, pointed out that a survey conducted by an independent organisation, Invest India Micro Pension Services (IIMPS), said that in the next five to seven years, eight crore people will join the scheme.