“Demand of the NC/JCM has always been to restore the “Defined Pension/Family Pension Scheme”

Shiva Gopal Mishra
Secretary

National Council (Staff Side)
Joint Consultative Machinery
for Central Government Employees
13-C, Ferozshah Road, New Delhi – 110001
E-Mail : nc.jcm.np@gmail.com

No.NC/JCM/2018

Dated: May 17, 2018

The Cabinet Seretary,
(Government of India),
Cabinet Secretariat,
Rashtrapati Bhawan,
New Delhi

Dear Sir,

Sub: New Pension System (NPS)

As had been discussed with you previously, I met the Secretary (Pension), Government of India, who told me that, he had sent the recommendations to the Secretary (Financial Institution), Government of India, and henceforth whatever is required would be done by his department only.

Since this issue is of utmost importance, particularly to younger blood recruited after 01.01.2004 and they are in quite anguish, we hope, the staff covered under NPS must be given some relief, and as has been discussed many a times, the Government of India must provide Guaranteed Pension/Family Pension Scheme where at least they should be able to draw 50% of their wages at the last pay drawn.

It has been observed that in all the countries where such scheme is in prevalent, the government is paying much more contribution, and in case of any market failure the same is covered by different government Social Security Schemes. The demand of the NC/JCM has always been to restore the “Defined Pension/Family Pension Scheme”.

We hope that, the government will consider the demand of the NC/JCM (Staff Side) and relief will be given to the staff covered under NPS.

Sincerely yours,

sd/-
(Shiva Gopal Mishra)
Secretary (Staff Side)
National Council (JCM)

Source: AIRF

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CONCEPT PAPER- CHOICE TO THE GOVT EMPLOYEES

A. Launch of NPS and Current scenario

1. The National Pension System (NPS) was introduced in 2003 for all Central Government employees (except armed forces) who joined the service on or after 01.01.2004. The NPS marked a paradigm shift from the Defined Benefit Pension Scheme to Defined Contribution Scheme, thereby easing the escalating fiscal stress on the Government on account of rising pension liabilities. In 2009 different Schemes under the flagship of National Pension System were launched under the private sector and unorganised sector.

2. The National Pension System (NPS) has been arguably hailed as one of the best designed pension products domestically with its several unique features like full portability across jobs and geographical jurisdictions, choice of investment options to suit different risk appetites, option to choose from among several fund managers, no entry or exit loads, and perhaps the lowest fund management charges in the world. It is also regulated by a dedicated regulator.

3. The passage of the PFRDA Act in September 2013 followed by notification of the Act on 1st February 2014 marks an important milestone in the history of the Pension Sector reforms as the Act provides an overarching mandate to the PFRDA for promotion and development of old age security in India. In light of the paradigm shift in the pension landscape in the country, it is imperative to review the progress of NPS so far and realign the existing policy framework for Pension Funds within the mandate of the Act.

4. The NPS adopted a direct selling model to keep the costs low and to avoid the urge to mis-sell due to the embedded commissions. This distributor-free and agent-free model was designed to protect the individual and to maximise the pension wealth. It was adopted even at the risk of a slow start. The NPS architecture has been designed to create an enabling environment for the citizens to save for retirement.

5. Additionally, NPS also provides flexibility to subscribers where they can switch their pension funds among three options, i.e. equity, corporate bonds and government securities. They can also change their fund managers if they are not satisfied with the performance of Pension Funds.

B. Need of Revamping

• It is more than 12 years under NPS Govt. Sector and 6 (six ) year since NPS was introduced in the market to cater to the retirement needs of Private Sector/Unorganised Sector subscribers.
• The NPS has made noticeable progress from the time of its inception, on boarding about 1 Crore subscribers with a total AUM exceeding 100000 crores by Dec 2015, with only 12% of the workforce covered by any kind of old age security in India, there is thus a huge untapped potential for NPS to expand. However, this would require multipronged approach with co-operation of multiple stakeholders including Central Government, State Governments, Autonomous bodies, trade bodies, Regulators and many more.
• Besides the expansion in coverage, the provision of old age income security also entails working towards adequacy of income post working life, which can be done by optimizing returns through appropriate investment guidelines. While devising the investment guidelines, the interest of the subscriber is to be kept paramount, balancing the security aspect with adequacy of returns. While returns on investment under DC scheme cannot be guaranteed, it is important to frame guidelines, which enable the pension funds to deliver good real rate of returns to the subscriber for meaningful old age income security, which cannot be done with overload of fixed income securities. Hence, an enabling environment is required to be created for the Subscriber to maximize his/her returns depending upon his/her risk appetite.
• The fiscal stimulus being provided by the Government each year through its budget announcements are a major boost to the NPS , propelling the built up of a pensioned society.
• The experience gained since last more than decade this has been quite obvious that the NPS system has a well laid out architecture, it has been able to draw enough attention from the individual subscribers by very little marketing and publicity. It is also perceptible that investor awareness towards the various financial products has grown to the extant where subscribers can decide about the mix of asset class and Pension Fund and change the same as per its discretion.
  C. NPS FOR GOVT. SECTOR EMPLOYEES

1. Earlier Government, the pension funds of the Central Government employees are currently being allocated amongst the three public sector pension funds (UTI PFM, SBI PFM, LIC PFM) in the ratio of their returns. The investment pattern for the Central Govt. employees is also stipulated by the Government, having a preponderance of fixed income securities, which can currently go upto 95% while the maximum exposure in Equities is restricted to 15%

2. In the early stages of the movement from Defined Benefit to Defined Contribution, what propelled the Govt to make these choices was, perhaps, the over-riding concerns towards shielding the savings of beneficiaries from volatility and risk, and protecting it from capital erosion. These anxieties seem justified and essential for the development of NPS in its nascent stages. The Directed Investment regime was also in keeping with the low financial literacy levels in the country and underdeveloped financial and nascent regulatory environment in the pension sector at that time.

1. CHOICE TO THE GOVT EMPLOYEES

Reasoning: Key reasons to claim choice to the Govt. employee from are –

1. Shift in risk from employer to employee: It cannot be over emphasised that the movement from DB scheme to NPS marks a shift in onus of funding the old age income security from the employer to the individual employee, through his/her individual retirement accounts.

2. Mandate under PFRDA Act 2013: It is in this back ground that the PFRDA Act provides for opportunities to the subscriber to maximise his returns in the risk return paradigm. Section 20(2) of PFRDA Act, 2013, states that there shall be a choice of multiple pension funds and multiple schemes. Hence, post the notification of the PFRDA Act, there is need to align the investment framework for the Govt employees including Central Govt employees.

3. Parity with other subscribers: The subscribers under the private sector are already enjoying a choice in the selection of Pension Fund Manager(both public and private sector PF) as well as the choice to allocate funds amongst the three asset classes (Equity(E), Corporate Debt (C) and G ( Govt securities) with only ceiling of 50% on equity. On the other hand, the investment pattern for the Central Govt employees prescribes preponderance of fixed income securities, which can currently go upto 95% while the maximum exposure in equities is restricted to 15%, effectively limiting subscriber choice.

4. Recommendations of the Bajpai Committee report (2015) : The recently released report of the Bajpai Committee has also recommended the opening of the choice of pension funds and allowing same investment pattern as permitted to the private sector employees.

a) Choice of the pension funds

1. The current process restrict the deployment of funds of the Central Govt. employees across the three Public Sector PFs only. In the first place, this prevents the employees to choose a pension fund(even amongst public sector PFs as they are restricted to a combination of three Public sector PFs) Secondly ,this dispensation disallows them to tap the expertise of the Private sector pension Funds. Not only is this discriminatory on the grounds of equity, this also militates against the spirit of the PFRDA Act which provides for choice of the Pension fund under section 20(2).

2. It may not be out of place to mention that the PFRDA Act further provide for at least one public sector Pension fund. Hence, those Govt sector employees always have the option of choosing a public sector Pension Fund. However, this has to be the conscious decision of the employee, based on his perception of the performance of the Pension Fund, rather than a mandate by the employer.

3. The opening of choice of Pension funds to the Central Government employees will not only benefit the employees but also galvanise the pension sector in more ways than one. It would create competition amongst the pension funds, both public sector and private sector- to vie for the pension corpus. Enhanced size of the market will also attract more players in Fund Management space leading to greater specialization, risk diversification, risk management and enhanced governance standards and better performance across the industry. The concomitant result would be increased efficiency in both pricing & servicing and higher levels of subscriber satisfaction. Hence, for the benefit of subscribers and development of the pension sector as a whole, it would be desirable to allow market forces to determine the size of the pension corpus managed by a pension fund rather than through a mandated / directed regime. This has also been recommended by the Bajpai committee as stated below.

The restriction of allowing Pension funds only from the public sector to manage the funds of Government employee subscribers may be done away with. This will also be in keeping with the mandate under the PFRDA Act to provide choice to the subscriber. On the other hand, the enhanced competition and the appurtenant economies of scale shall go a long way in building a healthy pension corpus for the subscriber.”

4. However, as approved by the Board, the default option for central Govt employees could continue be the combination of three Public sector Pension Funds as hitherto. Subsequently, this could be moved to one pension fund from the public sector and finally to any pension fund, selected as default Pension Fund.

b) Choice of investment pattern

1. The existing investment pattern prescribed for the Govt employees is broadly based on the guidelines stipulated by the Govt from time to time. Currently, the guidelines for the Govt sector are being revised broadly based on the Govt OM no 11/14/2013-PR dated 7th April 2015. The Govt. guidelines stipulate investment of minimum 80% in fixed
income securities- Govt securities and corporate bonds- which can go upto 95%.Investment in equity has been mandated between 5 to 15%.

2. As per the Bajpai Committee report (2015),

“ The design of the mandated investment norms in vogue today with predominance of low risk fixed income securities, that too mainly Government securities, has lower tolerance for risk, but a high tolerance level for lower returns especially in case of the Government Sector employees. This is, in the opinion of this Committee, unfair for the investors who may need a combination of low risk with moderate returns or even higher returns with higher risks. This is especially true for those in the early stages of their saving curve. There can be no denying that in the pursuit of risk-free investment, investors are getting the short shrift and are therefore revealing a preference for physical assets.”

3. On the other hand, guidelines for the private sector allows the subscribers to allocate their contribution across the three asset classes – Equity, Corporate bonds and Govt securities with only restriction of investment in equity upto 50% . Thus, on the grounds of parity, and keeping in view the spirit of the PFRDA act to allow choice of schemes, it is essential to revisit the framework for investment by the

Central Government employees and allow them choice of investment as available to the Private Sector employees.

4. This has also been recommended by the Bajpai Committee ( 2015) as under:-
“Multiplicity of investment mandates across various Regulatory Regimes within the domain of pension sector creates an uneven playing field and therefore there is an urgent need to harmonise the same. The existing investment norms across all regulatory regimes be harmonised, at least till such time as the move to a prudent investor regime is complete. This creation of a harmonised regime will usher in transparency and allow investors to compare their returns across product platforms. A beginning can be made by harmonizing the investment guidelines within NPS across Government and Private Sector i.e. loosening the guidelines for Govt sector to allow more play to the Pension Fund managers in asset classes like equity, which are historically known to beat inflation across various countries in the long run.

5. It is also pertinent to mention that the capital market has also been evolving rapidly with new instruments being offered and the opportunities for investors growing. With the shift of burden of funding the retirement income resting on the employee, it is important to create a facilitating environment to enable him to plan his retirement judiciously through prudent investments based on his risk appetite.

6. The opening of the Govt sector, which comprises the majority of the AUM of the NPS, will have cascading impact on the development of the capital market, and the development of the economy as a whole. A step in this direction has already been taken by the Govt by mandating minimum 5% investments in the equity in its OM no 11/14/2013-PR dated 7th April 2015. Harmonisation of the investment guidelines between private and Govt sector will also pave way towards a more unified pension regime in the country.

The opening of the choice to the Central Govt employees would be a first step in opening the choice to all the NPS subscribers as under:-

a) Choice of Pension Funds across all pension funds to all the subscribers under NPS including Govt Sector employees ( APY is a DB cum DC scheme and hence will be out of the purview )

b) Choice of investment pattern ( Choice of equity , Debt and Govt Securities) across all pension funds to all the subscribers under NPS including Govt sector employees . ( APY is a DB cum DC scheme and hence will be out of the purview)

Note: Comments may be offered vide e-mail on sumeet.kapoor@pfrda.org.in or in hard copy to the below address-

Ms. Sumeet Kaur Kapoor

Pension Fund Regulatory and Development Authority
1st Floor, Chatrapati Shivaji Bhawan
B-14/A, Qutub Institutional Area
New Delhi-110016

Source : pfrda

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Tax benefit available under National Pension System (NPS)

PENSION FUND REGULATORY AND DEVELOPMENT AUTHORITY
B- 14/A, Chhatrapati shivaji Bhawan
Qutab Institutional Area,
Katwaria Sarai, New Delhi – 110 016
Phone: 011-26517503
Fax:011 – 26517507
Website: www.pfrda.org.in

PFRDA/23/CORP/20/5

25th February, 2016

Dear sir,

Subject: Tax benefit available under National Pension System (NPS)

You would be aware that under the National Pension System (NPS), the subscribers can avail of tax benefit under Sec 80Cc D(1), up to 10% of their salary (Basic+DA) which is capped at Rs.1.50 lakhs under section 80CCE. From FY 2015-16, an additional tax deduction over and above the Rs.1.5 Lakhs, is available only to subscribers of NPS if they invest upto Rs.50,000 in NPS under Sec 80CCD(IB) of the Income Tax Act. any citizen of India including persons covered under old defined benefit pension scheme can open NPS account on voluntary basis and avail of the tax benefits u/s 80 CCD (IB) by contributing additionally Rs.50,000/- to NPS.

2. This additional tax benefit on investment upto Rs.50000/- provides an opportunity not only to those employees who are mandatorily covered under NPS, but also to all other employees who may be covered under old pension scheme/provident fund/superannuation fund, as well as to any other Indian citizen between 18 to 60 years of age, to avail of this tax benefit by opening an NPS account on voluntary basis and by investing the required amount.

3. PFRDA has provided an easy and convenient way to subscribe to NPS by recently introducing eNPS, which any individual can make use of to join NPS. A new subscriber can adopt the following eNPS methods for joining NOS:

(a) Using Aadhaar card issued by UIDAI which is authenticated through OTP received from UIDAI on the registered mobile of the applicant. In this case, the subscriber can instantly get himself/herself registered. He/she has to simply visit the eNPS module in NPS Trust website at www.npst.org.in.

(b) Using PAN and net banking of the selected bank chosen by the subscriber. In this case KYC verification is done by the Bank. The NPS account gets activated only after KYC verification by Bank. He/she has to go to eNPS module in NPS Trust website at www.npstrust.org.in.

4. A new subscriber can also open an account physically through any of the Points-of-Presence-Service Provider (POP-SP). The list is available on www.pfrda.org.in.

5. Therefore, your employees who are not NPS members can open their NPS account, and make contributions using any of the three options mentioned above. Existing NPS subscribers can also make additional contributions to avail of the tax benefit by using any of the options as stated above.

6. contribution upto Rs.50,000 in NPS for the additional tax benefit in the current year has to be made by 31-03-2016 and it is important that this message be conveyed to all your staff members and employees right upto the level of DDOs/DTOs, at the earliest. This will definitely help in their tax planning.

7. We request you to disseminate the above information to all concerned.

with regards,

Yours sincerely,

sd/-
(Mamta Rohit)
chief General Manager

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Online Subscriber Registration and contribution under NPS using eNPS platform

In light of Prime Minister’s “Digital India” campaign on promoting e-governance for providing last mile connectivity through extensive use of ICT (Information and Communications Technology) platforms, Pension Fund Regulatory and Development Authority (PFRDA) has been pursuing the development and operationalization of online transaction facilities for the prospective as well as existing subscribers of NPS.

PFRDA introduced eNPS online portal whereby PAN (Permanent Account Number) and savings bank account of new subscribers to NPS who are already customers of the banks are accepted as KYC with active participation of the banks acting as POPs for opening of accounts under NPS.

PFRDA has received feedback from prospective subscribers and other stakeholders that those who voluntarily seek to use Aadhaar as their document of identity for availing of the eNPS online platform to join NPS should not be deprived of this eNPS facility.

As the identity and address for such account holders is established through e-KYC facility with the express consent of the subscriber through One Time Password (OTP) and as Aadhaar is a unique number, its use as a KYC document rules out the possibility of opening duplicate retirement (PRAN) accounts. PFRDA has accordingly revisited the issue and believes that enabling eAadhaar in addition to PAN and bank account based KYC for the eNPS platform can reduce the cost and time of operation and ensure wider coverage to the citizens of India under the old age income security schemes and thus help in fulfilling the mandate given to it under the provisions of the PFRDA Act, 2013.

PFRDA has accordingly modified the eNPS functionality to accept PAN and bank account or eAadhaar as the KYC document for online registration of subscribers under NPS. With the operationalization of this modified eNPS platform, the subscriber will now have the following options for opening of account:

• Opening of account through any of the Points-of- Presence- Service Provider (POP-SP).

• Opening of account online using PAN and net banking of the selected bank. In this case KYC verification is done by the Bank. The PRAN gets activated only after KYC verification by bank.

• Opening of account online using Aadhaar No. and OTP received from UIDAI. In this case, the subscriber can instantly get their PRAN generated and can contribute.

The eNPS platform using Aadhaar based KYC verification is one of the options for any prospective subscriber to join NPS and it is optional and purely voluntary on the part of the prospective subscriber.

To register under NPS through eNPS using Aadhaar, the prospective subscriber needs to have Aadhaar Number/Card with access to the mobile number registered with Aadhaar.

With the use of this Aadhaar based KYC verification, the subscriber would be able to open his NPS account online. The Prospective subscriber will require to follow the undernoted process for opening of NPS account:

• The prospective subscriber will go to eNPS platform hosted on NPS Trust website www.npstrust.org.in and enter Aadhaar and validate the same using OTP (Sent on the mobile number registered with Aadhaar).

• Then he will be required to fill up the mandatory details like choice of Pension Fund, Investment Scheme, nominations etc.

• Address and Date of Birth details will be auto-populated from details available with Aadhaar.

• He will be required to provide a mobile number and email ID (Mandatory requirement).

• He will be required to Scan and upload the signature. Subscriber may also upload a scanned photograph, in case he/she wishes to replace the photo obtained from Aadhaar, if the Aadhaar photo is blurred or hazy.

• He will be required to make online payment (Minimum amount of Rs 500/-).

• After completion of this process, the PRAN will be generated instantly.

Subscriber will be required to print the form, paste photograph, affix signature and submit the physical form to CRA within a specified period of time while continuing contributing online.

A prospective subscriber can visit NPS Trust website www.npstrust.org.in and select NPS Online menu to register and contribute to NPS.

The complete information about eNPS is available on PFRDA website www.pfrda.org.in and also on NPS Trust website www.npstrust.org.in .

Through this facility, it is expected that the subscriber will have multiple advantages like seamless onboarding experience where he need not visit a Point of Presence and can register from anywhere through an internet connection, contribution with minimum cost of transaction and reduction in errors resulting from various manual activities.

Source: PIB News

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Press Information Bureau
Government of India
Ministry of Finance

02-February-2016 16:35 IST

1.15 Crore Subscribers for National Pension System (NPS) as on 23.1.2016

National Pension System (NPS) had 11,459,555 subscribers with a total corpus of Rs. 90, 327 crore as on 23rd January, 2016. The total Assets under Management are worth Rs. 109,140 crore while Assets under Management per subscriber is Rs. 95,000 on an average.

The number of NPS Subscribers of the Central Government are 1611,020 with a total corpus of Rs. 34,754 crore while subscribers from the different State Governments are 2,859,094 with a total corpus of Rs. 45,486 crore. The number of NPS subscribers in the Corporate Sector are 448,509 while in Unorganized Sector is 128,484, the total being 576,993. The number of subscribers under NPS Lite include 4,463,637 and under Atal Pension Yojana (APY) 1,948,811, with a total number of subscribers 6,412,448 in these two categories.

NPS subscribers of Central Government are 14.1% of the total subscribers while that of the State Governments are 24.9%. The NPS subscribers under NPS Lite constitute 39% while under APY 17% of the total subscribers.

Since PFRDA has completed two years of its statutory status on 1st February, 2016, to mark this occasion, PFRDA in collaboration with all its intermediaries in the National Pension System including Central and State Governments’ Nodal Offices, POPs, Aggregators, Central Recordkeeping Agency and NPS Trust etc. is observing NPS Service Week from 1st to 6th February, 2016. This week-long campaign is being dedicated to service-orientation towards the subscribers and aimed at awareness building and improved information dissemination. During this Service Week, besides sharing of information on the range of functionalities and services now available under the NPS, the subscriber community will be apprised about the need for constant updation of data/information to enable the system to operate at its optimum service level, so that the intended benefits can reach all the employees/subscribers under NPS. Besides, the subscribers will also be able to make best use of all the opportunities and facilities.

The Pension Fund Regulatory and Development Authority (PFRDA) is organizing the 2nd Pension Conclave in national Capital on 4th February 2016 with the theme, “Towards Universal Pension: Coverage, Adequacy and Sustainability” in which all the stake holders are expected to participate and share their experiences. PFRDA proposes to use this occasion to acknowledge/award the best performing banks and Post Offices in mobilization and registration of subscribers under the Atal Pension Yojana (APY) up to 31st December 2015, and institute awards for best performing POPs under the Voluntary segment of the National Pension System.

Earlier, PFRDA launched NPS Awareness Programme for State autonomous bodies, Unorganized Sector, Corporate Sector and other categories in order to highlight the benefits of joining NPS and has requested the various State Governments to implement NPS more inclusively among the State Autonomous Bodies, Boards, Corporations, Societies, Universities and State aided institutions under various State Government departments. During the awareness programme, key features and benefits of NPS, details and process of joining NPS, details about NPS architecture investment and exit guidelines of NPS are highlighted.

Source: PIB News

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