7th Pay Commission: Big changes made in National Pension System (NPS); government employees get this power now
7th Pay Commission: Lakhs of state government employees have been demanding the restoration of the old pension scheme. Conceding to the rising pressure, the Centre has been making changes in the National Pension System to make it more employee friendly. The new entrants to the central government service on or after 01.01.2004 are covered under the National Pension System (NPS). The Centre had in December increased its contribution under NPS from the existing 10% to 14%. Now, the finance ministry has proposed some major changes via a notification date January 31 which will benefit the government staffer:
7th Pay Commission: Choice of Pension Fund
7th Pay Commission: As in the case of subscribers in the private sector, the Government subscribers may also be allowed to choose any one of the pension funds including Private sector pension funds. They could change their option once in a year. However, the current provision of the combination of the Public-Sector Pension Funds will be available as the default option for both existing as well as new Government subscribers.
7th Pay Commission: Choice of Investment pattern
7th Pay Commission: The following options for investment choices may be offered to Government employees: (a) The existing scheme in which funds are allocated by the PFRDA among the three Public Sector Undertaking fund managers based on their past performance in accordance with the guidelines of PFRDA for Government employees may continue as default scheme for both existing and new subscribers. (b) Government employees who prefer a fixed return with the minimum amount of risk may be given an option to invest 100% of the funds in Government securities (Scheme G). (c) Government employees who prefer higher returns may be given the options of the following two Life Cycle based schemes: (A) Conservative Life Cycle Fund with maximum exposure to equity capped at 25% - LC-25. and (B) Moderate Life Cycle Fund with maximum exposure to equity capped at 50% - LC-50.
7th Pay Commission: Choices to the legacy corpus
7th Pay Commission: Transfer of a huge legacy corpus of more than Rs. 1 lakh crore in respect of the Government sector subscribers from the existing Pension Fund Managers is likely to impact the market. It may be practically difficult for the PFRDA to allow Government subscribers to change the Pension Funds or investment pattern in respect of the accumulated corpus, in one go. Therefore, for the present, change in the Pension Funds or investment pattern may be allowed in respect of incremental flows only.
7th Pay Commission: Transfer of legacy corpus
7th Pay Commission: PFRDA may draw up a scheme for transfer of accumulated corpus as per new choices of Government subscribers in a reasonable time frame of say five years. Once PFRDA draws up this scheme, change in the Pension Funds or investment pattern may be allowed in respect of the accumulated corpus in accordance with that scheme.
7th Pay Commission: Compensation For Delayed Contributions During 2004-2012
7th Pay Commission: (1). In all cases, where the NPS contributions were deducted from the salary of the Government employee but the amount was not remitted to CRA system or was remitted late, the amount may be credited to the NPS account of the employee along with interest for the due period. (2). In all cases where the NPS contributions were not deducted from the salary of the Government employee for any period during 2004-2012, the employee may be given an option to deposit the amount of employee contribution now. (3). In all cases where the Government contributions were not remitted to CRA system or were remitted late (irrespective whether the employee contributions were deducted or not), the amount of Government contributions may be credited to the NPS account of the employee along with interest for the due period.