The Pension Fund Regulatory and Development Authority (PFRDA) has rejected the demands from Rajasthan, Chhattisgarh and Jharkhand for custody of the accumulated corpus under the National Pension System (NPS), saying the law does not permit such access.
These states have reverted to the non-contributory defined benefit old pension scheme (OPS) from April 2022 from reform-oriented contributory NPS.
Even though the current ruling party in Punjab made a pre-poll promise to restore the old pension scheme (OPS), the state government has not yet sent any ‘proposal’ to PFRDA to withdraw NPS corpus, minister of state for finance Bhagwat Karad told Rajya Sabha in response to a question by BJP
“There is no provision under PFRDA Act, 2013…vide which the funds, which are already deposited both in the form of the government contribution and Employees’ contribution towards NPS, along with accruals, can be refunded and deposited back to the state government,” Karad said.
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As on October 31, 2022, Rajasthan has 0.525 million employee subscribers with total contributions of Rs 28,337 crore and assets under management (AUM) of Rs 39,473 crore. Chhattisgarh has 0.3 million subscribers with the contribution of Rs 12,148 crore and AUM of Rs 17,644 crore.
Jharkhand with 0.121 million subscribers has a corpus of Rs 8,107 crore and AUM of Rs 11,448 crore.
For the central government, there are 2.09 million subscribers with contributions amounting to Rs 1.45 trillion and Rs 2.04 trillion worth of total AUM under the NPS.
For the 32 states/UTs, the cumulative number of subscribers is 5.01 million with contributions amounting to Rs 2.66 trillion and Rs 3.65 trillion worth of AUM under the NPS.
Under NPS, a monthly contribution of 10% of basic pay and DA was to be paid by the employee and matched by the employer (the Centre and most states have since enhanced their contribution to 14%) to the corpus managed fund managers appointed of pension regulator PFRDA.
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Reverting to OPS may give some temporary relief to the state governments as it would stop monthly contributions to NPS, but the rising components of salaries/wages, unfunded pension and interest payments could lead to a debt trap for the state in the coming years, analysts have said.
Debt-GSDP of some states is very high. In the case of Punjab, it is 53% while for Rajasthan it is 40%, against the prudential level of 20% of GSDP.