Decks cleared for passing Pension Bill in Monsoon session

The Government may propose an investment option for assured returns in the New Pension Scheme (NPS). These proposals will be part of the official amendments to the Pension Bill, which is to be moved during the ongoing Monsoon session of Parliament.

“Apart from the existing investment options, the Government may incorporate more options. One will be for assured returns,” a highly-placed source told Business Line. The second option will not give any assured returns, but give maximum safety, he added.

At present, there are three schemes. The first one provides investment, mainly in equity, the second one in Government securities and the third one provides investment in bonds issued by any entity other than Central and State Government. These bonds include rated bonds/securities of public financial institutions and public sector companies, rated municipal bodies/infrastructure bonds and corporate bonds.

Apart from these three options, there is a default option, which is also called Auto Choice, where pension money is invested in equities, Government securities and corporate bonds in proportions which vary with age.

The option related to assured returns is based on suggestions given by the Standing Committee on Finance. The Committee, in its report, said, “It desires that the Government must devise a mechanism to enable subscribers of NPS to be ensured of such a minimum assured/guaranteed returns for their pensions so that they are not put to any disadvantage vis-à-vis other pensioners.”

The Government has also accepted the committee’s views on foreign direct investment. Accordingly, it will be 26 per cent.

Acceptance of these suggestions has won support from the principal opposition party, BJP.

“Since our concerns are taken on board, we have no objection to the Bill, which was initiated during our time,” senior BJP leader and Chairman of the Standing Committee, Yashwant Sinha, told Business Line.

Sinha said there was no understanding between the Centre and the BJP on the Insurance Bill.

“We have given our suggestions on the Bill. Now the ball is in the Government’s court. We will await their suggestions,” he added.

The Left parties said the Centre had not reached out to them on the Bill. “We have not been approached on the Insurance Bill,” said CPI(M) leader Sitaram Yechury. 

Source: Business Line. 

New pension system not better than existing EPS: EPFO

                  The Employees’ Provident Fund Organization (EPFO) says it disagrees with finance ministry’s proposal to encourage its subscribers to shift to New Pension System saying it does not provide better returns than its Employees Pension Scheme-1995.

The retirement fund body has said this in response to a letter written by Financial Services Secretary to Labour Secretary.

“If we take return of EPS as indicative return on the fund managed under EPS then the annualised return for the period May 2009 to May 2013 will be 10.47 per cent, which on the face of it, is higher than the return declared by NPS in its scheme for central government”, EPFO said.

Finance Ministry has written to the Labour Ministry saying: “The subscribers (of EPS) may be given an option to either remain with EPS or join NPS with the same contribution.”

The ministry argued that NPS, which is a self sustaining pension system, could be a good substitute for EPS and would be beneficial for subscribers as they would get decent returns and adequate pension wealth.

Moreover, the Finance Ministry said, “The government would be free from any open ended and financially unsustainable liability of EPS.”

Disagreeing with the contention of the Finance Ministry, EPFO said that EPS scheme provides social security for lower income group people in their old age. In addition, it also provides pension to widow, children and dependents in case of death of the subscriber.

Under the EPS scheme, many interim benefits are provided.

Subscribers can withdraw their contribution towards pension while withdrawing his or her EPF money. There is a lock in period of 15 years in NPS.

Moreover EPS subscribers get bonus of two years on completion of 20 years of service and there is provision of commutation or part withdrawal also. That is not available in NPS.

EPS’s corpus size stood at Rs 1.83 lakh crore as on March 31, 2013. Under the NPS, total corpus was at Rs 29,852 crore as on March 31, 2013 with a subscribers’ base of 47,70,507 members.

EPFO has a subscriber base of over 5 crore and manages PF corpus of Rs 3.7 lakh crore excluding the pension fund of Rs 1.83 lakh crore.