MUMBAI: India's pension sector has been opened up a notch wider with the New Pension Scheme now restricted to government employees set to be extended to individuals outside of the government.
Finance Minister P Chidambaram on Friday announced that the finance ministry had advised the pensions regulator -PFRDA to open up the scheme to private citizens also. The PFRDA will soon put in place the enabling framework to facilitate those working in the unorganised sector to participate in the scheme. The plan is to allow pension fund managers licensed by the PFRDA to offer schemes to individuals across the country using the vast network of banks and other agencies to collect the subscriptions. Of an estimated 425 million workers in the organised sector, a large number of them do not have any access to a social security scheme. It is this segment and also those in the unorganised sector that the New Pension Scheme seeks to target for coverage. The New Pension Scheme (NPS) now covers all those employees of the Central government who joined service on or after Jan.1. 2004. The scheme is based on defined contributions unlike the present system where the pension benefits are based on a formula linked to the last drawn pay. In the NPS, the pay-out on completion of the scheme or on retirement will hinge on the returns generated from the contributions made by the subscribers. The key difference in the NPS compared to the old -pay-as-you go scheme is that the benefits are not defined or assured- This reduces the liability of the government or the employer to that extent. Mr Chidambaram's announcement came at a function to mark the launch of the Central Recordkeeping Agency (CRA) for the NPS. The National Securities Depository Ltd (NSDL) is the CRA for the new pension scheme. According to finance minister, with rising life expectancy it was all the more important to ensure social security to the country's citizens. The average life expectancy of a person retiring at 60 years of age has now risen to 78 years. With better living conditions and nutrition, this period of retirement is bound to increase possibly even to the extent of equalling the years spent working. In such a scenario, the NPS aided by the CRA which would act as a means of administration and as an operational interface between PRFDA and other NPS intermediaries such as Pension Fund, Trustee Banks and Annuity Providers would be the only logical, compassionate answer to providing for the sunset years of several thousand Indians, Mr Chidambaram said. The current size of the unfunded pension liabilities is over 50% of the GDP. " Thank God there are not more actuaries in this country to catch onto the ticking time bombs that they have become." he said. Mr.Chidambaram appealed to one of the states which is seeking to set up its own CRA to utilise the NSDL's services. Referring to the move he said that it was like 'looking for a black cat in a dark room' while adding that the country owed a debt to the NSDL for the projects that it has undertaken including the Tax Information Network (TIN). PFRDA Chairman D Swarup said that a key requirement in the opening up of the sector was to ensure a level playing field in terms of tax treatment. Compared to all other social security schemes, the NPS attracts a tax at the last stage-which is on maturity. Such a taxation system creates a distinction between organised and unorganised sectors and also between those who joined the government before 2004 and after that. Sebi Chairman CB Bhave who had a big role in the CRA project as well as the growth of NSDL said that the depository should continue its socially beneficial projects and promised due support from the regulator for all such initiatives. http://economictimes.indiatimes.com/New_Pension_Scheme_opens_for_all/articleshow/3425552.cms -- Posted By Ronald Chisley to Investor Forums at 8/31/2008 08:56:00 AM --~--~---------~--~----~------------~-------~--~----~ Logon at – http://investorline.co.in/blogs/news Learning Center- http://investorline.co.in/blogs/learning Mutual funds - http://investorline.co.in/blogs/mutualfunds Life Insurance - http://investorline.co.in/blogs/lifeinsurance Investor Journal - http://investorline.co.in/blogs/investor Latest News - http://investorline.co.in/blogger/?q=aggregator/categories/ Create your own Forum & Blog at - http://investorline.co.in/blogger To post to this group, send email to [email protected] Visit this group at-http://groups.google.com/group/investor-forums?hl=en -~----------~----~----~----~------~----~------~--~---
