1. Govt employees under NPS set to get more flexibility

Govt employees under NPS set to get more flexibility

Government employees covered under the National Pension System (NPS) will soon get the right to choose their retirement fund manager.

By: | Published: May 4, 2015 12:51 AM

Government employees covered under the National Pension System (NPS) will soon get the right to choose their retirement fund manager, switch him if not satisfied with his performance and opt for higher (50%) investments in equities as the Pension Fund Regulatory and Development Authority (PFRDA) looks to liberalise norms for the sector’s growth.

These changes, which will likely be approved by the pension regulator at its board meeting on May 15, could ultimately end the monopoly of the three government sector pension fund managers (PFMs). These PFMs — SBI Pension Funds Private, UTI Retirement Solutions and LIC Pension Fund — managed Rs 69,316 crore, or 91% of the Rs 76,509-crore NPS assets under management (aum), as of January 2015.

The number of government staff enrolled under NPS stands at 38.5 lakh. The Centre made the defined contributory pension scheme mandatory for employees who joined the service on or after January 1, 2004. It has since been adopted by most state governments also.

After NPS was opened to the private sector in 2011, 3.46 lakh subscribers were enrolled under the scheme with AUMs of Rs 5,199 crore. However, this is not enough for eight extant PFMs to sustain their business for long.

“This (the proposed changes) will lead to a more rational allocation of funds among both private sector and government sector pension fund managers,” said RV Verma, member (Finance), PFRDA.

While the annualised return from the central-government NPS was below 11%, the returns from equity investments by the corporate-sector NPS subscribers have been much higher. That is because, unlike the government sector, where NPS equity investment is capped at 15%, corporate sector NPS subscribers are allowed to invest up to 50% in equity and choose their PFM based on their performance.

In the government sector, NPS contributions are equally split among the three selected PFMs, who invest the money in a pre-decided manner.

“Many of the central government departments said employees can study the market and make their investment decisions, so why should we deprive them of that,” Verma added.

To multiply NPS users’ equity investment avenues, the Bajpai panel has also recommended giving more space to PFMs to invest in newer instruments such as the ones issued by private equities, venture capital funds and exchange traded funds, subject to the overall cap.

Competition would lead to a volume-driven business model as well as efficient pricing, Verma added.


The cap on equity exposure in NPS for government staff is likely to go up from 15% to 50%.

Freedom to choose the pension fund manager (PFM) would create a level playing field for all PFMs and should lead to rational allocation of funds among PFMs, feel experts/

Competition will lead to volume-driven business and efficient pricing, encouraging more players to enter the pension business.

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  1. D
    Devinder Kumar
    Mar 19, 2016 at 3:55 am
    All India Central and State Govt Employess Join this group. Be unite and fite angainst new pension sheme, so that we can get old penion system for us. As nps has many drawbacks. Like no gurntee of pension and family penion after death. RY IS OUR PRESENT...PENSION IS OUR FUTURE In some states like Punjab and Himachal Pardesh Unions of CPF/NPS Employees are formed and stated functioning. For details join above group of facebook. Make union in your state or contact with existing union in Punjab and Himachal Pardesh.
    1. M Govinda
      Nov 23, 2015 at 8:32 am
      New Pension Scheme (later rechristened as National Pension System was introduced in December 2003, prospectively for central government employees (except those in defence services) joining service from January 1, 2004. For those affected, it was ‘subsution of existing defined benefit pension scheme by something very similar to contributory provident fund with no guaranteed return’. There is no evidence to show that the shift was after any study about the social security aspect inherent in a pension scheme. The primary ground for denial of pension benefits for ‘future’ employees was the unfunded pension liability of central government which exceeded three lakh crore of rupees in 2003. The ‘Pay As You Go’ method of meeting pension liability was being adversely commented. GOI refused to look at the suggestion to start funding pension liabilities. NPS was consciously excluded from the terms of reference of VI Pay Commission. In 2006-07, ING Group and Indian Insute of Management, Bangalore undertook a joint research on pension systems in India at the instance of ING Global Retirement Services. The findings are available in the form of a 588 page book “Facing the Future: Indian Pension Systems”(By David J. W. Hatton, Naren N. Joshi, Fang Li, R. Vaidyanathan, S. Jyothilakshmi, Shubhabrata Das and Sankarshan Basu. Publisher: Tata McGraw Hill Rs625). This well-researched doent did not find any takers in PFRDA or the concerned ministries in GOI. The VII Pay Commission has gone deep into the genesis and implementation of NPS, listed several concerns and made recommendations including one for upward revision of employer’s contribution. The following excerpt from Chapter 10.3 of the CPC report will give an idea as to how deep the NPS mess is: “The Commission notes that no department of Government of India is taking ownership of the NPS. The Commission recommends that a Committee consisting of Secretary, Department of Financial Services, Secretary, Department of Pensions and Pensioners Welfare and Secretary, Department of Administrative Reforms and Public Grievances may be consuted to review the progress of implementation of NPS. The Commission also recommends that steps should be taken for establishment of an Ombudsman f or redressing individual grievances relating to NPS.” M G Warrier, Mumbai

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