Interim NPS plan allows 5% equity investment

New Delhi, Jan 22 | Updated: Jan 23 2007, 05:30am hrs
The Centre has decided to allow 5% of the Rs 1,500-crore corpus accumulated under the new pension scheme (NPS) to date to be invested in equities as an interim measure, even as it failed to garner support from all states at a meeting with chief ministers on Monday.

Under the Centres interim investment pattern, modelled on the lines of non-government provident funds, pension funds will be allowed to invest another 25% of the corpus in central government securities, 15% in state government securities and 25% in public financial institutions and others. The remaining 30% can be invested in any of these three instruments.

The NPS was introduced in January 2004 and as many as 5 lakh government employees are part of the scheme. The Centre pays 8% on the corpus, pending a decision on deployment of these funds.

So far, 19 statesboth Congress- and BJP-ruledhave approved the NPS. Three Left-ruled statesKerala, West Bengal and Tripuraopposed the plan even after an appeal from Prime Minister Manmohan Singh earlier on Monday.

West Bengal finance minister Asim Dasgupta said the Left-ruled states were firmly opposed to the proposed pension system. We are opposed to the NPS because it implies a 10% cut in pay for employees and a cut in pension benefit by at least 30% compared with the present system, he said.

Helping Hand

5% can be invested in equity
25% in govt securities
15% in state govt securities
25% in public FIs
30% in any non-equity option
100% in government bonds

Finance minister P Chidambaram said the government was willing to allow pension funds to invest 100% of the corpus in government bonds. He said the government would license a state-owned institution to be the first pension fund manager.

The Centres pension expenditure would top Rs 35,000 crore by 2009-10 from Rs 28,963 crore in 2005-06, while for states it could exceed Rs 65,000 crore, compared with Rs 41,660 crore last fiscal.