Part ll New Pension Scheme

Please read the first part for continuity.

We saw in the earlier articles about the new pension scheme introduced by Govt to its employees from 01.01.2004. This type of scheme may be new to pure govt departmental employees but certainly not new to R & D institutions like CSIR (Council of Scientific and Industrial Research) etc. wherein the scientific staffs were earlier recruited under non –pensionable scheme called CPF (Contributory Provident Fund) and later were given option to convert to GPF and the pension scheme.
This CPF scheme is applicable to all Govt institutions which are not governed under pensionable scheme prior to 31.12.2003. This CPF SCHEME is in existence in many R& D institutions which were started newly for the last 20 years or so and the govt does not provide pension benefit to these organization and instead gone for the CPF scheme wherein it does not pay pension.
CPF scheme envisages a matching contribution from the govt subject to a maximum of 10 % of his emoluments (basic + DP) in line with the contribution made by the Govt servant in the fund. Hence Govt already started moving away from defined pension to contributory pension. The only difference is that the interest is paid to the Govt servant under CPF is as per the interest fixed by Govt for other Provident fund on yearly basis and is credited to individual’s account by the end of financial year.
Coming back to the new pension scheme, the return is based on the market forces and the Govt servant will be given option to opt for three categories of schemes , option A,B,C etc based on the ratio of investment in fixed income instruments to pure equity. The employees are free to opt for the categories which consists of pure equities, combination of equity and fixed income instruments like bond etc or pure fixed income instruments. The employee can choose the scheme as per his risk profile and the return also varies from scheme to scheme. This scheme provide a central record keeping agency for keeping the records and several fund managers to manage the fund.
The PFRDA (Pension Fund Regulatory and Development Authority) has been constituted by the central Govt and they have entered in to agreement with NSDL (National Securities Depositories Ltd ) for keeping records as a central record keeping authority and also will be providing the annual statements etc to the employees. Recently the PFRDA has appointed the Govt run fund houses like SBI, UTI Mutual fund and LIC to manage the fund based on competitive fund management charges. The record keeping charges are borne by the Govt which is a welcome step since in other cases like demat account etc the annual charges are collected from the clients.
As per PFRDA , now these fund managers will offer the employees investment option in the fixed income Govt securities only which gives assured returns and other categories will be made available later.

Continued in part lll