NPS launch deffered as model code of conduct comes into play

One step forward, two steps backward. That?s exactly what?s happened to the New Pension Scheme that was to be launched for private citizens from April 1, 2009 after years of dilly dallying by the government.

The UPA government has now postponed the launch of the scheme that was being rolled out by the Pension Fund Regulatory and Development Authority (PFRDA), thanks to the upcoming Lok Sabha polls. ?Keeping in view the Model Code of Conduct for Elections, it has not been possible for the PFRDA to continue the information campaign and undertake other preparatory activities as originally scheduled. It has, accordingly, been decided to defer the date of the extension of the NPS to other citizens,? said a finance ministry release on Thursday.

The PFRDA, however, contended that the matter is still being examined by the Election Commission and if it gives the go-ahead, the scheme would now be launched on May 1, 2009. ?But if we do not get the clearance, we will launch the NPS for private individuals from June 1 after the election process is completed,? the official said.

The interim regulator had already finalised most modalities of the new pension scheme for private citizens such as appointing pension fund managers and points of presence to collect pension contributions. Beginning February 28, it had also started an ad campaign for the scheme. ?Without a full fledged ad campaign, we can?t go to the market without people knowing about the scheme,? the official said.

Further, with the approaching elections, the PFRDA has also been unable to get clearances and approvals from the finance ministry for a number of issues including investment norms for the scheme. ?Certain decisions are still pending with the government, without which we can not go ahead with the scheme,? the official said.

PFRDA had suggested deviations from the investment guidelines finalised by the expert committee headed by HDFC chairman Deepak Parekh and sought public views on the same. While the expert panel.

Meanwhile for the six pension fund mangers and the 23 points of presence (PoPs) were also gearing up for the launch; the decision to defer the scheme has been a setback. Letters of allotment have already been sent to these intermediaries, FE learns. Contracts were to be signed by the end of March.

?It?s not a very happy development. The calendar for the roll out was decided and was announced six months back, so it?s definitely a set back. We hope the Election Commission gives its approval to the launch,? UK Sinha, chairman UTI-AMC said.

While the PoPs had finalised their information kits and agents, the pension fund managers were in the process of setting up separate companies to manage the contributions. State Bank of India and UTI Asset Management Company, which are already managing the pension contributions of government employees already have separate pension funds.

But the four other PFMs?IDFC Mutual Fund, Kotak Mahindra, ICICI Prudential Life Insurance and Reliance Capital – were expected to set up separate pension funds. Experts are sceptical if the firms would like to lock up Rs 10 crore at a time when cash is king and uncertainty prevails over the actual launch date for the new scheme.

?We?ll follow whatever the government says, and one quarter won?t make so much of a difference,? said Sam Ghosh, chief executive officer Reliance Capital. ?We are in the process of setting up the pension fund, the amount of Rs 10 crore needed for it is insignificant, so we will not delay setting it up,? Ghosh said.