Govt gives assent to new pension system
Giving approval to appoint New Pension Systems (NPS) Trust for fund management and other services and the Draft Agreement for signing the New Pension System (NPS) Trust, New Delhi and to adopt the scheme for fund management on the pattern of Government of India a recent state cabinet meeting has pledged to do everything in its power to promote the welfare of the employees of the state.
According a highly placed official source, with a view to introduce pension reform and establishing a solid and sustainable social security arrangement in the country, the Central government notified the Defined Contribution Pension System (New Pension Scheme) for the new entrants to Central government services, except for the Armed Forces, replacing the existing system of Defined Benefit Pension System with effect from January 1, 2004.
The source further mentioned that the matter was tabled in a recent cabinet meeting as an agenda for signing of agreement between the state government and the New Pension System (NPS) Trust, to keep pace with the Central government, as state government also introduced the said New Pension Scheme with effect from January 1, 2005.
Necessary instructions had been issued for recovery of 10% of Pay, Dearness Pay and Dearness Allowances from the monthly salaries of employees appointed on or after January 1, 2005 and for crediting to government account number 8342, other deposit and for debiting the equal share of the state government for Tier-I.
The source said the system is mandatory for all new recruit to the state government service and the existing provision of the Defined Benefit Pension and GPF would not be available to the new recruits.
In addition to the above Tier-I pension account, each individual may also have a voluntary Tier-II withdrawable account at his option.
But, the scheme for voluntary contributions under Tier-II will be made operative during the period of interim arrangement and therefore no recoveries will be made from the salaries of the employees on this account.
The official source further mentioned that as per the agreed guidelines of New Pensions System Trust, an individual can normally exit at the age of 59 or 60 as the case may be. At exit the individual would be mandatorily required to invest 40% of the pension wealth to purchase an annuity (from an IRDA-regulated Life Insurance Company) which will provide for pension for the lifetime of the employees and his/her dependent parents/spouse at the time of retirement. The individual would receive a limp-sum of the remaining pension wealth, which he would be free to utilize in any manner.
Individuals would have the flexibility to leave the pension system prior to age 59 or 60, as the case may be. However, in this case, the mandatory annuitisation would be 80% of the pension wealth.
The guidelines of the trust, further mentioned that, a pension Fund Regulatory Development Authority (PFRDA) has been appointed under executive order of the Ministry of Finance, Government of India pending passing of the PFRDA Bill by the Parliament. PFRDA has signed a contract agreement with the National Security Depository Limited (NSDL) as Central Record keeping agency for administration and customer service for all subscribers of the NPS, issue of unique Permanent Retirement Account Number (PRAN) to each subscriber, maintaining a database of alls Prans issued and recording transactions relating to each subscriber’s PRAN and action as an operational interface between PFRDA and others NPS intermediaries, such as Pension Funds, Annuity Service Providers, Trustee Banks etc.
The official source further mentioned that while tabling the issues before the recent cabinet meeting, it has been mentioned that the CRA system has become operational with effect from June 2, 2008 for Central government employees. The state government of Manipur has already decided to avail the services of the CRA and an agreement has been signed with the NSDL on November 12, 2009 last year.
So far, there are 5,813 new entrants who are appointed under state government on or after January 1, 2005 in 32 departments. Of these recoveries salaries of 5,459 employees have been made but government’s matching share has not been paid by most of the department.
Reconciliation of accounts with those of AG’s figure shall be carried out before the transfer is effected to the trustee Bank. With this elaborate submissions of guidelines of the trust, the recent cabinet meeting has approved to solicit to appoint New Pension System (NPS) Trust for fund management and other services and the Draft Agreement for signing with the New Pension System Trust, New Delhi and adopt the scheme for Fund Management.
Government gives assent to new pension system NPS Trust
Govt gives assent to new pension system