Pension plan’s St foray with Cabinet

NEW DELHI: The Union Cabinet will soon take up the investment pattern for the new pension scheme (NPS). The Cabinet’s approval of the investment pattern would allow the Pension Fund Regulatory & Development Authority (PFRDA) to appoint fund managers to run the NPS.

“We have already submitted a Cabinet note in this regard (investment pattern of funds under NPS), which could be taken up any time,” department of economic affairs joint secretary KP Krishnan said.

Mr Krishnan said after the Cabinet’s approval, PFRDA would be able to appoint fund managers to run the pension scheme for government employees whose funds are currently parked in public accounts that yield 8% annual rate of interest.

So far, 19 state governments have agreed to give their employees an option to park 5% of their pension funds in the equity market under NPS. However, West Bengal, Kerala and Tripura — all ruled by the Left parties — have stuck to the old pension system as it provides assured returns to employees.

NPS is in operation for government employees recruited since January 1, 2004, and does not give guaranteed returns like the old pension scheme, which was based on defined benefit. The government has close to Rs 1,800 crore as contribution to the NPS lying in public accounts.

The PFRDA Bill is pending in Parliament due to stiff opposition from the Left parties. The standing committee on finance has recommended the Bill to Parliament, subject to certain modifications and amendments.

Pension reforms have assumed importance as both the Centre and state governments are facing rising bills under this head. The total expenditure of the central government on pension payments to its retired employees has gone up from Rs 3,272 crore in 1990-91 to Rs 28,963 crore in 2005-06.