NPS has not ensured coverage of all eligible employees, CAG audit finds

Mandatory contribution based retirement fund scheme National Pension System (NPS) has not ensured full coverage of all eligible government sector employees even after 15 years of implementation and there have been delays related to deductions, bills and remittances, a CAG report said on Wednesday.

The performance audit was undertaken to get an assurance that the system of NPS was established as envisaged, all eligible government sector employees had been covered and due contributions (from subscribers and employers) were timely deducted and remitted to trustee banks, said the Comptroller and Auditor General (CAG) report tabled in Parliament.

CAG said it has categorised the findings of the performance audit into three broad areas -- planning, implementation and monitoring.

With respect to implementation, the audit found that there was no assurance that all nodal offices and 100 per cent of eligible employees were covered under NPS, even after 15 years of implementation, CAG said in a release.

"Delays were noticed in issue of Permanent Retirement Account Number (PRAN), first deduction of NPS contributions, bills reaching PAO (Pay and Accounts Office), uploading Subscriber Contribution Files (SCFs) and remittance of contributions to the trustee bank," it said.

CAG said of the sample it selected for the audit, Rs 5.20 crore of the central government/central autonomous bodies and Rs 793.04 crore of states/union territories DDOs (Drawing and Disbursement Offices) were not remitted to the trustee banks by nodal offices which had joined NPS.

On the planning front, the government auditor said even after 15 years of introduction of NPS, rules on service conditions and retirement benefits were pending finalisation.

"In respect of states and central and state autonomous bodies, PFRDA did not fix timelines to upload legacy data and transfer of legacy contributions to the trustee bank, affecting the timely transfer. PFRDA was not aware of the quantum of legacy amount to be transferred to the trustee bank," it added.

Also, there was no indication that actuarial evaluation of the fund / scheme was conducted once in two years, as recommended by the High Level Expert Group (HLEG) and therefore audit could not draw assurance on viability of the fund/scheme, CAG pointed out.

The auditor said between FY13 to FY19, out of the 66-68 ministries /departments, not all had constituted the Monitoring and Overseeing Committees comprising joint secretary, principal chief controller of accounts/chief controller of accounts and financial advisers, rendering the implementation "weak".

CAG has recommended the government should put in place a foolproof system to ensure that all the nodal offices and eligible employees are registered under NPS.

"Delays need to be penalised and compensation effected to avoid loss to the subscriber," it added.

The government should make sure that rules on service matters are in place for government NPS subscribers and it must identify all cases of legacy contributions not remitted to trustee bank and ensure its remittance with due interest and compensation.

"In line with PFRDA Act, immediate steps to be taken to provide minimum assured return to the subscriber, ensuring timely social security post retirement," it said.

The auditor suggested that the Department of Financial Services (DFS) may arrive at minimum replacement rate taking into consideration the annuity rates, increased longevity and interest rates.

However, it also highlighted the steps taken by the government to address some of the long-pending issues.

The government has notified that subscribers would be compensated for non-deposit or delayed deposit of contributions during 2004-12 at General Provident Fund (GPF) rates. Besides, government sector NPS subscribers were allowed choice of schemes and fund/asset managers with effect from 1 April 2019.

NPS was introduced under the Pension Fund Regulatory and Development Authority (PFRDA) from January 1, 2004 for new entrants to central government service and all autonomous bodies (except armed forces), replacing the old pension system. Subsequently, state governments too adopted NPS on voluntary basis for their employees.

Under this, employee pay a monthly contribution, matched by the government and upon exit, one has to mandatorily invest at least 40 per cent of pension corpus to purchase an annuity and the remaining is paid to the subscriber as lumpsum.

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However, for exit prior to the age of 60, the mandatory annuitisation is 80 per cent and only 20 per cent is paid as lumpsum.