'Govt's NPS funding incomplete'

   The government may not have fully funded its pension liabilities in respect of employees who are covered under the National Pension System (NPS). This revelation has been made by a panel headed by former Sebi chief G N Bajpai which has submitted a report on pensions for the informal sector to the pension's regulator.

   The report, which was released last week, said that the present number of accounts (12 lakh) appear to be on the lower side considering that it has been over six years since the NPS was made mandatory for government employees. However, there is no source that provides information on the exact number of government employees who have joined after January 2004.

This is because the list includes all central government service employees, employees of central ministries or departments, employees of non-civil ministries or departments, including railways, posts, telecommunication or armed forces (civil), and employee of autonomous bodies, grant-in-aid institutions, union territories or any other undertakings whose employees are eligible to a pension from the Consolidated Fund of India. The report adds that this does not take into account the 27 states of which 17 have started the process of transferring their employee pension into NPS.

   Questioning who will fund the pensions of employees whose contributions remain "un-invested", the report said that if this gap does exist, the number of government employees being kept out of NPS could possibly be growing every passing year. "This will then require the government to ring-fence this problem quickly before it becomes a threat to the fiscal once again," the report said. The Committee to Review Implementation of Informal Sector Pension was constituted by the Pension Funds Regulatory Authority of India (PFRDA) to suggest ways to make the NPS more popular among non-government employees for whom this was a voluntary retirement savings option.

   The National Pension System was aimed at replacing the earlier government's "pay as you go" system where retired employees drew pension based on last drawn salaries out of the Consolidated Fund. However, with pension liabilities set to consume a large portion of government revenues, the centre decided to replace the "defined benefit" pension with a defined contribution where the government will make a matching contribution to what is deducted from the employees salary towards pension. These savings are handed over the pension fund managers and the employees are expected to the accumulated savings to buy an annuity plan from a life insurance company after retirement.

   Fund managers point out that if an employer in the private sector fails to turn in his contribution towards provident fund stringent action is taken by authorities.

   "There is no concrete evidence or any authorized government document to back this up, but going purely by the number of investors and the headcount of new appointments, there seems to be a gap" the report said.

Courtesy; TOI