Par panel pitches for assured returns on NPS

Par panel pitches for assured returns on NPS

New Delhi: A parliamentary panel has recommended that subscribers to the New Pension System (NPS) should get an assured return on their investments that is at least equal to the interest rate given by the Employees’ Provident Fund Scheme.

The Standing Committee on Finance headed by senior BJP leader Yashwant Sinha has also suggested imposing a 26% cap on foreign direct investment (FDI) in pension programmes.

“The committee notes that foreign investment in the pension sector may be capped at 26%...," the panel said in its recommendations on the Pension Fund Regulatory and Development Authority (PFRDA) Bill, 2011.

The Bill introduced in the Lok Sabha in March, 2011, has no provisions pertaining to FDI as yet.

The panel said spelling out the FDI policy in the provisions of the PFRDA Bill would have been more in the “fitness of things, as the pension fund managers holding the stake of the old age income security of their clients cannot be compared" with other agencies in the financial sector.

Currently, FDI is not allowed in pension schemes.

The committee also suggested that the government devise a mechanism so that subscribers of the NPS get guaranteed returns on their pension, so that they are not at any disadvantage via-a-vis other pensioners.

“The committee would recommend that the minimum rate of return on the contributions to the pension fund of the employee should not be less than the rate of interest on the Employees Provident Fund Scheme," it said.

In India, no pension fund management company offers a guaranteed pension product.

Subscribers to the Employees Provident Fund Organisation (EPFO) get annualised interest of 9.5% on their contribution.

The NPS, launched in January, 2004, has about 24 lakh subscribers, mostly those employed with the central government.

The committee further suggested that the government make concerted efforts to extend the coverage of the scheme in both the public and private sector.

Currently, pension schemes are being monitored by an interim regulator, the Pension Fund Regulatory and Development Authority (PFRDA).