NATIONAL PENSION SYSTEM : Facing the Future


The Editor The Economic Times CHAT ROOM June 23, 2015 NPS: Facing the Future This refers to your editorial “NPS Must Offer Reinvestment Choice” and the piece “Designing Pension” under Citings (June 23). The New Pension Scheme which later got rechristened as ‘National Pension System’ when NPS was legitimised through legislation after more than ten years of introduction is still floating in the air searching for identity and purpose. The captive clientele created through forceful imposition of the scheme for ‘future’ employees of central government excluding defence services(the scheme introduced in December 2003 was applicable to those who joined service on or after January 1, 2004) and later made applicable to state government and public sector employees, helped the scheme survive so far. To sell, NPS needs to bring clarity on what way it is a pension scheme, different from similar schemes marketed by mutual funds or how the scheme would be more beneficial in comparison to the options now offered by EPFO. How the pension funds will be deployed is of lesser concern for the investor, provided there would be clarity as to how much is to be saved for a secure post-job life and how the employer will provide the funds to save. Somewhere, the jugglery of words like ‘Defined Contribution’ and ‘Defined Benefit’ will have to stop and authorities will need to face realities. In 2006-07, ING Group and Indian Institute of Management, Bangalore undertook a joint research on pension systems in India at the instance of ING Global Retirement Services. The findings are available in the form of a 588 page book “Facing the Future: Indian Pension Systems”(By David J. W. Hatton, Naren N. Joshi, Fang Li, R. Vaidyanathan, S. Jyothilakshmi, Shubhabrata Das and Sankarshan Basu. Publisher: Tata McGraw Hill Rs625). One wishes, Government of India and PFRDA revisits the analysis contained in this book which has gone into the evolution of new pension systems in several countries in the world and the relevance of those experiences in the Indian context. Facing the Future claims to “analyse the results of extensive market surveys, draws from the experience of industry experts and studies the different pension systems around the world. The book encourages thinking on the pension issues which will lead to a viable solution to India’s problems.” M G WARRIER, Mumbai

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