New pension system to offer portability, investment choice

NEW DELHI: Government employees will be entitled to the new defined contributory pension system from January one next year, which would offer options to invest upto 50 per cent in equity and even switch over to a different scheme to get higher returns.
The new regime will increase the pension bill of the government initially but it will come down in the long term, Finance Secretary D C Gupta said at the 8th Insurance conference of Ficci here today.
"It will be a defined contributory pension system. Employees will have the options of portability (switch from one scheme to another) and making their investment choice," he said, adding the Finance Ministry has estimated that pensioners would get a higher return through the new scheme.
Employees can choose the investment pattern on their pension fund from safe, balanced and growth schemes depending on the debt and equity exposures.
"The new scheme will be applicable for government officials from January one, 2004. It will also be applicable for private players. We expect large number of corporates to join after the entire mechanism is in place," he said.
While government will make matching contribution for its employees, Gupta said corporates would be free to make any proportion of contribution for its employees.
Government has passed a resolution of the new pension regime and constituted a Pension Fund Regulatory & Development Authority, which would lay down the norms for the sector.
Pension Fund managers would be picked up through a competitive bidding process, Gupta said, adding a Central Registration Authority would be constituted soon.