National Pension System rules: The State governments are now free to adopt the provisions of gazette notification of the Central Government on NPS fund managers and investment patterns on their own volition
National Pension System rules: The State governments are now free to adopt the provisions of gazette notification of the Central Government on NPS fund managers and investment patterns on their own volition, as per a recent circular of Pension Fund Regulatory and Development Authority (PFRDA). Through a notification dated 31st January 2019, the Ministry of Finance had introduced the choice of the pension fund and investment pattern in Tier 1 of the NPS for the employees of the Central Government. Several state governments also adopted some provisions of the Centre’s notification. However, some states had been seeking clarification from the Centre. The PFRDA clarified on this issue in a circular this month (date 1st June 2020)
NPS for state government employees: What PFRDA said
“It has been brought to the notice of the Authority that while some of the State Governments (SGs)/SABs/CABs have either partially or wholly adopted the provisions of Gazette Notification F. No.1/3/2016-PR dated 31-01-2019 issued by Dept of Financial Services (DFS), Ministry of Finance (MoF), the others have been seeking clarifications on the same. It is, therefore, clarified that the State Governments (SGs)/ SABs/ CABs are free to adopt the provisions of the said Gazette notifications on their own volition, based on their own internal approvals and notifications, without seeking the Authority’s approval,” PFRDA said in its circular dated June 1, 2020.
National Pension System: What Centre’s notification said
The Central government’s notification had introduced the following provisions:
- The Government’s monthly co-contribution was enhanced from 10 per cent of Basix + DA to 14 per cent.
- Compensation for non-deposit or delayed deposit of contributions in certain cases.
- Choice of the pension fund in Tier-1 of NPS: The government subscriber can choose any of the pension funds including private sector funds. They can change the option once a year.
- Choice of investment pattern in Tier-1 of NPS: Government subscribers have three options. A) default scheme in which funds are allocated among three public sector fund managers. B) Option to invest 100 per cent of funds in Government securities. C) option of life cycle based schemes for better returns for those who can take comparatively higher risks.
- Change in pension fund or investment pattern is allowed only in respect of incremental flows only.