New pension plan to debut in Jan

NEW DELHI: The Finance Ministry has decided to kick off the restructured pension scheme for fresh entrants to government through a transitional arrangement from January 1, ’04, without waiting for the regulator — Pension Fund Regulatory and Development Authority — to be in place.
The arrangement worked out by the government now entails making deductions from the salaries of fresh entrants and placing these sums in the Public Account of India. This account comprises of all public money received by or on behalf of the government of India other than those credited to the Consolidated Fund of India (CFI).
According to senior government officials, until the PFRDA is fully operational, the government will act as a fiduciary trustee and park the funds in the public account. All those joining the government from January 1 onwards will contribute 10% of their salary towards the new scheme with the government making a matching contribution.
The contribution made through such deductions will earn an interest of 8% which is the interest on the General Provident Fund for government employees. The new pension scheme is based on defined contributions, in contrast to the existing scheme where the benefits are defined and the investment risk is borne fully by the employer.
Contributions to general provident fund and small savings instruments such as the public provident fund, savings certificates, reserve funds bearing interest (railway funds and telecom funds) and reserve funds not bearing an interest (central road fund, sugar development fund), fees and penalties accruing to Sebi are in the public account.
The receipts into public account and disbursements out of it are not voted by the Parliament. The government essentially acts as a banker or a trustee and refunds the money after the completion of the contract. If warranted, the monies can be deployed by the government to tide over temporary cash flow problems.

The delay in the selection of the Chairman of the PFRDA and the members of the pension fund regulator has prompted the ministry to work out a transitional arrangement for implementing the scheme. In the blueprint for the opening up of the pension fund business, it was envisaged that the PFRDA would first select a Centralised Record Keeping Agency and then a clutch of fund managers through a competitive bidding process. These fund managers in turn would offer a few schemes to start off based on the investment pattern to be prescribed by the regulator.