The Chairman of the Pension Fund Regulatory and Development Authority (PFRDA), Deepak Mohanty, recently disclosed that the regulatory body is currently working on a pension scheme that will offer a guaranteed minimum return. He also provided updates on the Atal Pension Yojana (APY) and discussed the progress of a panel reviewing the pension system for government employees.
Planning Assured Return Pension Scheme
Mohanty stated that the PFRDA is actively developing a pension scheme that will provide a minimum assured return. This new scheme aims to strike a balance between risk and return. While providing an assurance of minimum returns comes with a cost, similar to the APY program where the government bears the cost, the pension fund would require additional capital due to the higher risk involved. Mohanty assured that the PFRDA has made progress in developing this product and emphasized the importance of making the return attractive.
Enrollment and Performance of Atal Pension Yojana (APY)
The APY currently has around 53 million subscribers. For this year, the target for enrollment is 13 million, compared to 12 million last year. Mohanty expressed the PFRDA’s goal to increase enrollment under the APY scheme. He mentioned that the Regional Rural Bank has been successful in this regard. The APY program has generated a return of 9 percent, with the government providing gap funding for the scheme.
Review of Pension System for Government Employees
Mohanty, who is a member of the panel led by the finance secretary, addressed the progress of the committee’s review of the pension system for government employees. He mentioned that it is premature to comment on the progress at this stage. The committee’s objective is to suggest modifications to improve the pensionary benefits of government employees covered under the National Pension System (NPS). The committee’s considerations include fiscal implications and the impact on the overall budgetary space, ensuring fiscal prudence to protect the common citizens.
Refund of NPS Corpus and State Demands
Regarding the demand by some states to return the National Pension System (NPS) corpus, Mohanty clarified that there is no provision in the statute to refund the pension amount as it belongs to the contributors. In March, the central government stated that the PFRDA Act does not include a provision for refunding the accumulated NPS corpus. The states of Rajasthan, Chhattisgarh, Jharkhand, Punjab, and Himachal Pradesh had requested a refund of the corpus accumulated under the NPS after deciding to revert to the Old Pension Scheme (OPS).
Background on the National Pension System (NPS)
The National Pension System (NPS) was introduced by the central government in December 2003 as a replacement for the defined benefit pension system. Its objectives were to provide old age income security in a fiscally sustainable manner and channelize small savings into productive sectors of the economy through prudent investments. Initially mandatory for new government recruits (excluding the armed forces) from January 1, 2004, the NPS was later extended to all citizens on a voluntary basis from May 1, 2009.
