Pension Fund Regulatory and Development Authority (PFRDA) will appoint four public sector fund managers to implement the new pension scheme (NPS).
The Pension Fund Regulatory and Development Authority (PFRDA) will appoint four public sector fund managers in the next three months to implement the new pension scheme (NPS) for employees of the central and state governments.
The PFRDA will also appoint Central Record Keeping Agencies (CRAs) for the purpose.
At an Assocham seminar here on Monday, PFRDA chairman D Swarup said the implementation of the defined contribution NPS, which came into effect from January 1, 2004 for all fresh recruits in government service, will be undertaken through an executive order since the PFRDA Bill is still hanging fire in the face of Left opposition.
Swarup said that the finance ministry has empowered PFRDA through an “executive order” to appoint CRAs and pension fund managers to cover central and 19 states government employees subscribing to NPS.
PFRDA has called for letters of expression of interest from prospective fund managers, the last date for which is Tuesday (February 6, 2007).
The move follows the Centre’s decision last month to notify investment guidelines for the accumulated funds under NPS on the same pattern as that of the non-government employees’ provident fund.
These guidelines would allow fund managers to deploy 5% of the corpus in stocks and 10% in AAA-rated corporate bonds.
Swarup said the four pension fund managers would be drawn from public sector companies as the government can ill afford to displease its Left allies.
There is already an initial corpus of Rs 1,500 crore of NPS money to be managed. The fund managers are likely to offer returns in the range of 14-29% to subscribers.
Swarup said PFRDA has also recommended to the finance minister to grant a tax incentive to NPS subscribers for investment of Rs 20,000-30,000 to develop this sector on top of the tax exemption currently available on total annual savings of Rs 1 lakh.
Swarup added that if the Pension Bill is passed, the pension fund business could touch Rs 2 lakh crore in the next couple of years.
In the absence of pension reforms, however, the total fiscal stress both on the centre and states for extending pension benefits to their employees would increase to Rs 1,60,000 crore per annum from Rs 75,000 crore per annum now.
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