NEW PENSION SYSTEM: D. Swarup (right), Chairman, Pension Fund Regulatory and Development Authority (PFRDA), with C. B. Bhave, Chairman and Managing Director, National Securities Depository Ltd.(NSDL), addressing a press conference in New Delhi. Photo: Kamal NarangNEW DELHI (The Hindu), November 28, 2007:
India's Pension Fund Regulatory and Development Authority (PFRDA) moved another step forward towards operationalising the New Pension Scheme (NPS) by appointing National Securities Depository Ltd. (NSDL) as the Central Recordkeeping Agency (CRA).
PFRDA Chairman D. Swarup announced here today that “We have signed an agreement with National Securities Depository, appointing it as Central Recordkeeping Agency (CRA) for the New Pension Scheme (NPS) for all Central Government employees recruited since January 1, 2004.”
The pension fund, he said, was expected to grow by about Rs. 1,000 crore annually with about one lakh employees joining the scheme each year. All 19 states will participate. The three Left ruled states Kerala, Tripura and West Bengal have opted to keep out.
Under the NPS, the pension fund regulator has already appointed State Bank of India (SBI), UTI Asset Management Company (UTI-AMC) and the Life Insurance Corporation (LIC) as pension fund managers through a competitive bidding process. While LIC has already incorporated its pension fund, SBI and UTI-AMC are expected to complete the process December 15.
Once the scheme’s architecture becomes fully operational, the NPS corpus of Central Government employees is to be distributed among the three fund managers based on the initial investment management fee and transaction-based charges quoted by them.
According to NSDL Chairman C. B. Bhave, the depository has been appointed CRA for 10 years. Apart from setting up call centres to provide information to account holders, NSDL will issue ‘Permanent Retirement Account Number’ (PRAN) on the pattern of the PAN card to each pension account holder, provide annual statements and act as an operational interface between the PFRDA and the fund managers.
As per the scheme, the Government and its employees were to contribute 10 per cent each of the employee’s monthly salary in the pension fund. The Government was expected to transfer the funds to the three fund managers by June 1, 2008, to make the system operational, Mr Swarup said.
Mr. Swarup pointed out that to start with, only two options would be offered as per government investment norms for non-government provident funds. Apart from risk-free and assured returns through investment in government bonds and securities, the other option would be five per cent direct investment in stock markets and 10 per cent in equity linked mutual funds, while the balance amount would be in government security related funds, he said.
However, once the PFRDA Bill, pending in Parliament since March 2005, received approval, the pension regulator would offer the employees more options, including investment of up to 50 per cent in stock markets, and also allow private sector employees to join the scheme.
Out of the total pension funds, SBI would get 55 per cent, UTI-AMC 40 per cent and the remaining five per cent would be administered by the LIC through their separate companies, of which 26 per cent stake could be offloaded to foreign investors, Mr. Swarup said.
As for the charges by NSDL, Mr. Swarup said the Government would bear all the expenses, including Rs. 350 as annual charges per account, Rs. 50 as a one-time charge and Rs. 10 per transaction in respect of its employees covered under the NPS. The new system would result in zero pension liability on the Central and state governments over a period of 30-33 years, he said.
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