Civil servants who joined the government before January 1, 2004 may have the option to continue under the existing pension system, even after they are brought under the ambit of the New Pension Scheme (NPS) next January.
The Centre?s decision to give government employees the opportunity to opt out of the NPS is likely to pacify Left Parties, who have repeatedly stalled legislation aimed at overhauling the government?s archaic pension system.
Under the NPS, a part of the employees? pension fund can be invested on the stock market for potentially higher returns.
According to government sources, the Centre may also allow workers who are neither employees of central or state governments nor of autonomous bodies, but are covered under the Employees? Provident Fund, to join the NPS. This would ensure that employees across the organised and unorganised sectors obtain proper retirement benefits. The sources said no legislative provisions were required to include on a voluntary basis under the NPS workers outside the government?s ambit.
The sources added that these proposals would be incorporated in the beleaguered Pension Fund Regulatory & Development Authority Bill, 2005, which is expected to be re-tabled in Parliament in the winter session. The Bill will also ensure that there is a full-fledged regulator with necessary guidelines in place for the pension sector.
At present, only civil servants who joined the government on or after January 1, 2004 are covered under the NPS, which is a shift from the defined benefit to a defined contribution scheme. About 5 lakh subscribers, with a total corpus of Rs 2,000 crore, already fall under the new system. Three fund managers?Life Insurance Corporation, State Bank of India and UTI Asset Management Company?have recently been selected and will soon be formally appointed by the Centre to manage the pension fund. Under a government notification, 5% of the pension corpus can be invested in equities.