Rajasthan has emerged as the most proactive in terms of state employees’ contribution to the National Pension System...
Rajasthan has emerged as the most proactive in terms of state employees’ contribution to the National Pension System (NPS) while West Bengal remains the lone state to stay off board. In recent meetings with the pension regulator PFRDA, the Left-ruled Tripura has agreed “in-principle” to a proposal that the state government staff join the NPS soon, while West Bengal decided against such a move.
“The CM (Banerjee) said she would like to see how the NPS fares in terms of returns before making a decision. Also, despite the fact that the NPS scheme will give greater returns than EPF over a long-term period, the (employee) unions say they want to stick to the assured return model of the old scheme (EPF). We are pursuing the matter with West Bengal,” PFRDA chairman Hemant G Contractor said.
“However, we (PFRDA) have made some headway with Tripura. Proposal for adopting NPS is under active consideration of the (Tripura) government. The state will be on board by the end of this year,” he added.
Of the total contribution of Rs 32,750 crore by state governments to NPS as on this May 23, Rajasthan topped the list with Rs 4198 crore followed by Madhya Pradesh with Rs 2759 crore, Karnataka (Rs 2571 crore), Uttar Pradesh (Rs 2363 crore), Andhra Pradesh (Rs 2191 crore), Haryana (Rs 1935 crore), Punjab (Rs 1850 crore), Gujarat (Rs 1748 crore), Bihar (Rs 1636 crore) and Chhattisgarh (Rs 1559 crore).
At present, it is mandatory for all employees of Central government (barring Armed Forces) and Central autonomous entities who joined service from January 1, 2004 to join NPS. However, those government employees not mandated to join NPS can do so voluntarily under the ‘all citizens model’ of NPS open to every citizen between 18-60 years of age.
Between FY12 and FY16 (till April), the number of subscribers for state NPS grew 2.3 times from 11.56 lakh to 26.52 lakh and contributions saw a jump of over 9 times from Rs 3,535 crore to Rs 32,488 crore during the same period.
The overall subscribers base under all plans — central government, state government, corporate sector, unorganized sector and NPS Swavalamban — nearly tripled from 31.34 lakh to 91.22 lakh and contributions increased almost 5 times from Rs 13,686.39 crore to Rs 68,241.27 crore.
For state and central government schemes, up to 15% of the contribution is invested in equities and the rest in government and corporate and debt paper. Since inception in 2009, the state government scheme has given an annualised returns of over 10%.
Like central government employees, the contributions of state government employees are managed by three pension fund managers (PFM) — LIC Pension Fund, SBI Pension Funds, and UTI Retirement Solutions.
The investment management fee charged by PFMs is 0.0102% per annum. Every month 10% of the employees salary (basic plus DA) is invested in NPS through the state government’s nodal office. On retirement, the subscriber will have to invest at least 40% of his accumulated savings to purchase a life annuity from PFRDA and the rest can be taken as lumpsum.
An expert panel headed by GN Bajpai has recommended to the pension regulator to give the option of up to 50% (up from 15%) equity exposure to both state and central government employees under the NPS to help them earn higher returns like their private sector peers. The panel has also proposed allowing 100% equity play for all subscribers (government and private) over a period of six years.