New Pension System: Ensure minimum returns, Parliament panel tells Govt

A Parliamentary Panel has asked the Government to devise a mechanism to ensure a minimum assured/guaranteed return to subscribers of New Pension System (NPS).

In the absence of such a guarantee/assurance, the NPS cannot justifiably claim to provide ‘old age income security', the Standing Committee on Finance said in its report on the PFRDA Bill, 2011. The report was tabled in the Lok Sabha on Tuesday .

This minimum assured return should be provided to ensure that the NPS subscribers are not at any disadvantage

vis-à-vis other pensioners. The minimum rate of return on the contributions to the pension fund should not be less than the interest rate on employee provident fund scheme, the House Panel headed by Mr Yashwant Sinha said. Any shortfall on this count (providing minimum assured return) should be made good from the Budget, the report said.

“As any effective pension scheme needs to be underpinned by stability of returns and reasonable post retirement incomes, it is imperative that Government should provide for minimum guaranteed return and not the mere camouflage of market based guarantee, which should not be less than the minimum return available currently under the defined pension scheme,” the report said.

Any move to provide for a minimum assured return would also be complementary to the proposed Clause 25 in the PFRDA Bill, 2011 wherein ability to provide guaranteed returns has been made an eligibility criteria for fund managers, the report pointed out.

FDI cap at 26%

The Standing Committee has also recommended that the foreign direct investment (FDI) in the pension sector be capped at 26 per cent. The Government favours this.

>krsrivats@thehindu.co.in