Punjab and Haryana will soon have new pension schemes for which the deductions will be made from pay bill of January 2009. The pension scheme will work on defined contributory basis.

The Punjab government took a decision to this effect after the Cabinet cleared the proposal at a meeting on December 3 while Haryana?s finance department issued instructions in this regard on December 9. The Punjab government has appointed SBI Pension Funds, the National Securities and Depository Limited (NSDL), UTI Retirement Solutions Limited, LIC Pension Fund Limited, Bank of India and New Pension System Trust as the ?service providers?.

However, Haryana government has appointed the National Security Depositary Limited as central record keeping agency in respect of the new pension scheme. In, addition there will be three pension fund managers-LIC, SBI and UTI. The Bank of India will work as the trustee bank for the new pension scheme.

The funds of new pension scheme will be invested by the pension fund managers as per the investment scheme opted by the subscribers. However for the time being, the funds will be invested in the default scheme proportionally in central government securities, state government securities, PSU bonds, and equity and in private sector debt or equity linked schemes of mutual funds.

The scheme will cover all regular government employees joining service on or after January 1, 2006. The scheme will have two tiers. Contribution to tier-I was mandatory for the government servants joining government service on or after January 1, 2006. Under tier-I, the government employees will have to make a contribution of 10% of basic pay plus dearness pay and dearness allowance, which will be deducted from the salary bills every month by the drawing and disbursing officer. The state government will make a matching contribution for each government servant, who contributes to the scheme.

The tier-II of the New Pension Scheme will not be operational at present and no recoveries will be made from the salaries of the government servants on this account. No deduction would be made towards general provident fund contribution from the government servants joining regular service on or after January 1, 2006, as the general provident fund scheme was not applicable to them.

The new defined contributory pension schemes will replace the existing system of defined benefit pension system.