Having missed out on a major mention in the Budget, the Pension Fund Regulatory and Development Authority is hoping that the next Budget will come up with some concrete proposals for the sector, including a 25-year extension to government subsidy of Rs 1,000 for the unorganised labour market.
“Going forward, we expect an announcement to extend the government support to the NPS (New Pension Scheme) Swavalamban scheme by 25 years beyond 2016-17. This will be a major confidence building measure,” Pension Fund Regulatory and Development Authority (PFRDA) acting chairman, R V Verma, told PTI.
Under the Swavalamban scheme, the government pays a fixed contribution of Rs 1,000 per account for enrolment. It was started for a limited period in 2010 and the government support is set to end in 2017.
With over 80 per cent of people employed with the unorganised sector, the scheme is targeted at those not having social security cover under any scheme. The contributions need to be till Rs 12,000 a year for an individual to qualify for the government support.
Verma said the PFRDA has already written to the government asking for the extension, saying the fiscal support will go a long way in getting people from the lower rung of the society to save for their future.
In the backdrop of a majority of NPS accounts being held by people employed with the Central or state governments, Verma said an extension of the scheme will help in marketing the product in a better way.
He stressed that continuation of the scheme will not result in trouble to the national exchequer as well.
“The NPS architecture is premised on defined contribution principle. Therefore, it has a huge advantage for the exchequer as it releases burden on the fiscal,” he said.
Apart from extension of government support for the scheme, Verma said the regulator is also seeking to get NPS on par with the existing schemes run by EPFO and other super annuity schemes by doing away with the tax at the time of withdrawals.
He said NPS has long-term impact as it enables long-term savings and will also help the national savings rate.