Will GPF rate track PPF cut?

Will GPF rate track PPF cut?: While the government has defended its move to cut rates on small savings schemes from April 1, 2016, its own employees are anxious about the prospect of a similar lowering of interest on their retire

March 22, 2016
GPF: Pay As You Go?

Apropos Vikas Dhoot’s piece “Will GPF rate track PPF cut?” (March 21). Kindly refer to the following excerpts from the article:
The official argued that the GPF is distinct in nature from the PPF which is a savings scheme competing with bank deposits that anyone can tap, while GPF is a genuine retirement benefit for government employees. “This may not be easy to explain for the government…a GPF account is purely notional…There is no GPF corpus per se. A part of our salary is deducted (not paid) and the government makes a notional credit to our PF account, where interest is credited annually, and the final amount due to you is paid at retirement on a Pay As You Go basis.”
This is stretching the ‘Pay As You Go’ facility available to GOI too far. In 2003, when GOI unilaterally through an executive order discontinued Defined Benefit Pension Scheme by offering Defined Contribution-based NPS for civilian employees joining service from January 1, 2004, one of the compelling ground was GOI’s inability to fund its own pension scheme.
In the fitness of things, GOI should at this stage consider treating unfunded liabilities in pension and PF as ‘GOI borrowings’ and make provisions for interest dues from current revenues instead of following the ‘Pay As You Go’ method which transfers current liability to future generations.
M G Warrier, Mumbai


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