According to official sources, the proposed scheme would have an underlying market mechanism to mitigate the risk that would solely fall on the employer. They added that the mandatory default option - automatic shifting of those who fail to make choices to the safer pure g-secs option - would also be part of the NPS. The ministrys note also proposes allowing up to 26% FDI in the pension sector.
The Pension Fund Regulatory and Development Authority would be empowered to determine the portfolio composition with regard to the schemes to be offered under the NPS, officials said.
The NPS that would broadly mark a shift from the concept of defined contribution to that of defined benefit would have a 100% g-secs scheme, which implies that the subscriber will have the option to put his entire fund in such securities. The scheme would be a low-risk-low-return one.
| PFRDA had earlier ruled out |
any guaranteed return on
Assured return was the only way
to get the Left agree to reforms
Subscribers will have to pay a small fee for minimum assured return
Draft Cabinet note also proposes
26% FDI in the pension sector
The PFRDA Bill proposes that at least one pension fund manager should be from the public sector. It may also have a clause under which no subscriber would have the flexibility to withdraw any portion of the fund at any point until retirement.