What makes the NPS shine | Business Line
What makes the NPS shine | Business Line
Online comments posted on November 17, 2013(Published on November 21):
Online comments posted on November 17, 2013(Published on November 21):
The article gives an impression
that NPS has stabilised as an investment option in the Indian Financial Market.
Ther can be no two views on NPS as a concept which can, in ideal conditions
graduate into an investment instrument for securing the objectives detailed in
the article. But the background in which the original NPS(New Pension Scheme)
came into being in 2004 and the scheme’s progress so far do not generate hope.
When conceived, its immediate ‘mandate’ was to eliminate the then existing
defined benefit based pension scheme in government and public sector. Centre
was in a hurry to give some alibi for not creating a pension fund. The Central
government employees who were in service as on December 31, 2003 have a Defined
Benefit Pension Scheme. The pension liabilities of central government which
were being met on a Pay As You Go basis
were becoming unmanagable. According to a 2008 estimate, the net present value
of Centre’s pension liabilities was Rs 3,35,628 crore(6th Pay
Commission Report,2008). Considering this staggering liability which grows
proportionately with rise in inflation rate and periodical revision in pay
structure, Central Budget, 2003-04 contained a proposal to introduce the new
restructured defined contribution pension system for new entrants to central
government service. The New Pension Scheme (NPS) for new entrants to central
government service from January 1, 2004, except to Armed Forces, in the first
stage, replacing the existing system of defined benefit pension system was thus
introduced through a notification dated December 22, 2003.
In the NPS corpus of about
Rs35,000 crore mentioned in the article, less than ten percent is accounted for
by members outside the government and public sector employees for whom NPS has
been made compulsory.
Considering the above background
and now that the PFRDA Chairman has resigned in not so enviable circumstances, and
already there are different views on overlapping jurisdictions of IRDA and
PFRDA, really, NPS will have to take a rebirth to serve the purpose envisaged
in the article.
M
G Warrier, Mumbai
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