Finance Ministry calls meet on November 1 to address issue.
Arun S.
New Delhi, Oct. 27
Two-thirds of the State Governments and a couple of Union Territories have not remitted the pension contributions of their new employees to Bank of India, which is the trustee bank for the accumulated monies under the New Pension Scheme (NPS), sources in the Finance Ministry and the Pension Fund Regulatory and Development Authority told Business Line.
This is despite all these Governments signing up for the NPS as early as 2003. The NPS covers all Government employees. Their pension entitlement is based on their own ‘defined contributions' with a matching amount from the Government concerned.
The employees will, therefore, not be able to get pension benefits that their fund would have entitled them to earn, had the contributions been invested in the instruments which they had asked for.
Lackadaisical approach
Due to the lackadaisical approach of these Governments, the trustee bank is unable to accumulate the contributions and transfer these to Pension Fund Managers such as SBI, UTI and LIC, who, in turn, would invest the money in equity or debt instruments.
The investment portfolio depends on the choice exercised by the States/UTs. (This could include investment pattern notified by the Finance Ministry and the subscriber's risk appetite.)
However, the employees will certainly have a claim to demand returns on the contributions to their pension account retrospectively (from the date of signing up) till their date of retirement/superannuation and that too, at the average rate (currently 12-14 per cent) earned by NPS funds, the sources claimed.
Liability strain
They added that the liability on this account would have to be borne by the State Governments themselves.
“This increasing liability can put a strain on the finances of these Governments. In fact, the difficulty in paying up a huge amount is one of the reasons why these Governments are delaying the completion of formalities,” an official said.
In other words, on the date when an employee demands the returns on his/her pension amount as per the NPS rate of return on a compounded basis, the State Government concerned will have to either pay up or face litigation, the sources pointed out.
A worried Finance Ministry has taken serious note of the failure of these states/UTs and its fiscal implications. The Ministry has called a meeting with the States on November 1 to address the issue, the sources said.
However, five States — Chhattisgarh, Jharkhand, Madhya Pradesh, Bihar and Haryana (interestingly, all but Haryana, being run by non-Congress Governments) — have completed all the formalities after joining the NPS including uploading of the contributions.
Among the big States that have not completed the formalities, including making remittances, are Tamil Nadu, Rajasthan, Uttar Pradesh and Maharashtra. They have not signed the contract with the NPS Trust and the Central Recordkeeping Agency. They have neither set up a Nodal Office nor registered its subscribers. They have also not uploaded and remitted the contributions.
Andhra Pradesh has registered 58,195 subscribers, but has uploaded the contributions and made remittances of just six of them. Karnataka has registered 73,898 subscribers, and has completed most of the formalities, but it has uploaded and remitted their contributions only from January 19.
But Karnataka had joined the NPS from as early as April 1, 2006 and has not uploaded the contributions from that date till January 19, 2010.
The total registered NPS subscribers from the 26 States and UTs is 4,03,819. States such as Kerala, West Bengal, Tripura and Sikkim are yet to join NPS.
arun.s@thehindu.co.in
Source:the hindu businessline
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