FM to meet CMs to push pension reforms

New Delhi, Jan 19 | Updated: Jan 20 2007, 05:30am hrs
Financial sector reforms are again acquiring steam. After indicating that the foreign direct investment (FDI) in the insurance sector would be hiked to 49% from the present 26%, the government has decided to move ahead on pension sector reforms also. Finance minister P Chidambaram will hold a meeting with state chief ministers on Monday to discuss the new pension system (NPS) which envisages a shift from the defined benefit to a defined contribution system.

Under the proposed system, NPS subscribers could invest their pension corpus in either of the four investment patternssafe, balanced, growth and 100% government. It is learnt that Prime Minister Manmohan Singh would also address the chief ministers on the issue.

As many as 16 states have already joined the NPS. The move is expected to build consensus over the NPS, an insider said, adding most state governments were likely to support the new system. Left parties have reiterated that they would oppose the pending Pension Fund Regulatory and Development Authority (PFRDA) Bill if the government tabled it in Parliament.

The government may issue an executive order to put the NPS with all its investment options in place for all the central government employees who joined the services from January 1, 2004 onwards.

The Sixth Pay Commission might also be difficult to implement in case the NPS was not put in place.