Swavalamban Pran Card

Issuing PRAN Card For National Pension System For India

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Govt. of India’s Swavalamban Scheme

Special focus towards Economically Disadvantaged and Unorganized Sector

PRAN Card – Permanent Retirement Account Number

A Pension provides people with a Monthly Income when they are no longer Earning.

Tuesday, 29 September 2015

District lags much behind in Atal Pension Scheme

The Pradhan Mantri Atal Pension Scheme has received only 1,279 applications so far mainly because of the apathy of the implementing agencies and scheme's failure to convince the potential beneficiaries. Though the installment is very low, very few people have participated in it.

As per the figures shared by the district lead bank, Bank of India, 608 applications from rural areas have received for the scheme while 671 from urban areas. Out of 1,279 as many as 1,261 bank accounts attached for the scheme are from public sector banks.

Compared to the pension scheme, there are more applicants for Prime Minister Suraksha Bima Yojana and Prime Minister Jivan Jyoti Bima Yojana in the district. Both the schemes have received 1,45,474 and 1,48,063 applications so far.

M G Kulkarni, general manager of lead district bank, Bank of India said, "It is challenge for us to convince the people about importance of the pension scheme. People are aware of the pension schemes up to some extent but still there is little response from the people for it. We are working out some plans to increase its reach-out."

Sources close to the development said that the planning of the scheme has some problems. The maximum pension offered in the scheme is Rs 5,000 per month. Even if someone is in his or her 30s and pay higher amount as installment to get Rs 5,000 per month pension; nobody is sure that after 20 years what value Rs 5,000 will have in the market. Unfortunately, no senior government official comes out and addresses this basic and pin-pointed question about the pension scheme, said the official on the condition of anonymity.

Sujit Minchekar, Shiv Sena MLA from Kolhapur district said that the government officials need to take extra efforts so that some people can participate in the scheme. Getting some pension after turning 60 is necessary and some people will benefit for sure. But there has to be more efforts than regular ways of issuing media releases and distributing leaflets. The real beneficiaries of the scheme are people from unorganized sectors working in urban areas as well as some small scale industries, he said.


Centre releases Rs 2,000 crore for pension scheme

This is in addition to the Rs 250 crore contributed by the central government as grant-in-aid for providing minimum pension of Rs 1,000 to the pensioners of Employees' Pension Scheme, 1995.

The union government has released Rs 2,000 crore to the Employees' Pension Scheme as its contribution for the year 2015-16, Minister of State for Labour and Employment Bandaru Dattatreya said on Monday.

This is in addition to the Rs 250 crore contributed by the central government as grant-in-aid for providing minimum pension of Rs 1,000 to the pensioners of Employees' Pension Scheme, 1995, the minister said in a statement.

The minimum pension for the EPS pensioners was increased to Rs 1,000 per month in September last year.

It is necessary to infuse additional amount by the central government to sustain the continuance of the minimum pension, the statement added.

The contribution of central government is calculated at the rate of 1.16 percent of the monthly wages of the members contributing to the scheme.

This is in addition to the funding by the employers covered under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952, contributing 8.33 percent of the monthly wages of the members of the scheme.

Banks to calculate, disburse 6 % dearness relief to pensioners

New Delhi, All pension disbursing authorities including nationalised banks have been asked to calculate the quantum of dearness relief payable to pensioners, after the recent six per cent increase in it by the government.

The move comes following a decision by the Union Cabinet early this month regarding six per cent hike (from existing 113 to 119 per cent) in dearness allowance (DA) to central government employees and dearness relief (DR) to pensioners with effect from July 1, 2015.  With the increase, central government employees and pensioners will get 119 per cent of DA and DR, respectively.

"It will be the responsibility of the pension disbursing authorities, including the nationalised banks, etc.
to calculate the quantum of DR payable in each individual case," an order issued today by the Ministry of Personnel, Public Grievances and Pensions said.

In the case of retired Judges of the Supreme Court and High Courts, necessary orders will be issued by the Department of Justice separately, it said.

The offices of Accountant General and authorised pension disbursing banks are requested to arrange payment of relief to pensioners etc.

Without waiting for any further instructions from the Comptroller and Auditor General of India and the Reserve Bank of India, the order said.

There are about 50 lakh central government employees and 56 lakh pensioners.


Saturday, 26 September 2015

APY the subscriber may actually be getting a sub optimal return

In the recent budget, the Finance Minister announced the Atal Pension Yojana, which promises a fixed pension of at least Rs.1,000 at age 60 if subscribers contribute pre-defined amounts over their working life. The APY suffers from five problems.

1. Clarity of objective

The NPS-Swavalamban (NPS-S) has been the flagship pension scheme for the informal sector since 2010. While it has taken root over the last few years, problems in the design and process of the scheme persist. The APY seems to be motivated by these concerns. The scheme document says: `… coverage under Swavalamban Scheme is inadequate mainly due to lack of clarity of pension benefits at the age after 60. The Finance Minister has, therefore, announced a new initiative called Atal Pension Yojana (APY) in his Budget Speech for 2015-16′. Clarity of pension benefits could be interpreted as clarity of process for receipt of benefits, or certainty about the amount of benefit. The exact interpretation has not been made clear. It seems that the intent of the government is to migrate the entire existing NPS-S to the APY [See Page 7 of the APY FAQs]. It is not clear that this is the right approach. A careful examination of the lessons obtained from NPS-S over the last four years (e.g. Sane and Thomas, 2015) would have helped design a better response. Perhaps there was a role for co-contribution separately from the pension guarantee.

2. Design of the procedure

There is considerable confusion on how the APY is actually going to work. Initially, the APY was to be sold through the same aggregators that distribute the (NPS-S). New documentation indicates that it is actually only open to bank account holders. All the existing NPS-S customers are to be migrated to the APY with an option to opt-out. Does this place the responsibility of opening bank accounts for NPS-S customers on the aggregators? What happens to those who wish to continue with the NPS-Lite i.e. use the NPS without the co-contributions? In that case, the PFRDA ought to define well-defined standards of skill and care that aggregators will be expected to exercise towards a customer as invariably the aggregator will end up playing the role of an advisor when making a decision on whether to opt-out of the APY, or continue only the APY or continue the APY along with NPS-Lite.

The scheme levies penalties on those who are not able to maintain the required balance in the savings bank account for contribution on the specified date and close bank accounts if contributions are not paid for 24 months. However, we know from the NPS-S experience that informal sector workers often do not have liquidity, are not able to contribute on time, but do come back over subsequent periods. This design of the APY will invariably exclude those who cannot maintain a balance in their savings bank accounts or make regular contributions, defeating the purpose of providing a formal sector savings mechanism.

3. Price of the guarantee

Apparently innocent guarantees can prove to be disastrously costly when viewed in their entirety (e.g. Shah, 2003). The APY seems to be motivated by the desire of the government to ensure that on contributing continuously, a member gets at least a pension of Rs.1,000. While not explicitly specified, the APY seems like a minimum return guarantee which will ensure that accumulated savings at retirement do not fall below a certain value. There are different kinds of guarantees, and several ways to design minimum return guarantees. For example, an absolute rate of return guarantee promises a pre-specified rate of return, while a relative rate of return guarantee promises a return close to the average of all funds. The motivation for the choice of this particular design, and the calculations that influenced the choice have not been articulated. Under the APY the subscriber may actually be getting a sub optimal return. This is not surprising, as all guarantees come at a cost (Pennacchi, 1999). However, policy makers need to show the application of mind: the class of guarantees which was evaluated, and the logic that led up to this choice. The contributions under APY are to be invested as per the investment guidelines prescribed by Ministry of Finance, Government of India. The investment guidelines, and how they would finance the guarantee of the APY are not yet clear.

4. Safeguards against arbitrary increases

Almost all pension guarantees in the world have turned into fiscal problems. Even if a guarantee is fiscally sound at the outset, modifications to the program design later on render it bankrupt. Governments are tempted to increase benefits prior to an election. Apparently innocuous changes are announced, which add up to many percentage points of GDP. Any guarantee program requires an elaborate array of safeguards to protect against reckless actions in the future. The APY features no safeguards. It does not require governments to show actuarial calculations before any changes to the design are introduced. An example of a defined benefit guaranteed return plan running into funding difficulties is the Employees Pension Scheme (EPS). Estimates suggest that the EPS is facing a shortfall of Rs.54,000 crore, and several changes in scheme design have now been put in place owing to these funding difficulties.

5. Improper process

Indian finance has taken a big step forward by committing to the Handbook on adoption of governance enhancing and non-legislative elements of the draft Indian Financial Code. The procedural requirements in the Handbook, for framing regulations include a statement of objectives and a cost benefit analysis of each of the provisions. Many of the mistakes of the APY could have been avoided by the use of this process. It is not too late to apply this process to APY, even now.


Wednesday, 9 September 2015

India aims to created under Pradhan Mantri Jan Dhan Yojana to extend insurance

The Government of India is joining the UN-based Better Than Cash Alliance. The announcement comes on the First Anniversary of the Prime Minister  Narendra Modi’s flagship financial inclusion programme Pradhan Mantri Jan-Dhan Yojana (PMJDY).

Under PMJDY, in one year, about 180 million new accounts have been opened, with deposits totaling more than $3.4 billion (223 billion Rupees).

The new partnership with the Better Than Cash Alliance, made up of Governments, companies, and international organizations, is an extension of Indian Government’s commitment to reduce cash in its economy. Digital financial services lower the cost of providing financial services and make it more convenient for poor people to access their accounts.

The Union Finance Minister of India Arun Jaitley said: “The scale of ambition of Pradhan Mantri Jan-Dhan Yojana has been much higher than for any other financial inclusion initiative in the past. The project has been instrumental in bringing almost all families of the country into the formal financial system and enabling citizens at grassroots level to perform financial transactions and keep their hard-earned money safe.”

India’s announcement comes ahead of next month’s United Nations Special Summit in New York, when Prime Minister Shri Narendra Modi and other world leaders will launch the adopted Sustainable Development Goals (SDGs). Digital financial services are a key tool for the implementation of the goals, and advocates hope India’s leadership inspires other governments to harness the power of digital payments as a strategy for achieving the SDGs.

Dr. Ruth Goodwin-Groen, Managing Director of the Better Than Cash Alliance said that India’s leadership and progress are inspirational for countries around the world. He said that by making the digitization of payments to achieve financial inclusion a top priority, the Indian Government is showing its commitment to improving the lives of its people and driving inclusive growth.

One year ago, the Government of India had announced PMJDY with a goal of covering every household with a bank account in less than five months’ time. The programme focuses on citizens excluded from the formal financial sector, including women, small farmers, and labourers. To ensure that these accounts are actively used, the Government is delivering financial products, such as credit for economic activity, as well as remittance facilities, insurance, and pension directly into the accounts.

The Union Finance Minister of India Shri Arun Jaitley said “We have been recognized by the Guinness World Records for opening over 1.8 crore (10 million) bank accounts in a single week. As a next step, the aim is to utilize these accounts for extending insurance, pension, and credit facilities to those who are currently excluded from these benefits.”

Dr. Hasmukh Adhia, then Secretary, Department of Financial Services, Ministry of Finance, Government of India, said: “PMJDY has been a game changer in the country’s financial inclusion efforts. The initiative has demonstrated that when we converge the efforts of all stakeholders, and work in unison with clearly defined goals, unprecedented results follow.”

The financial inclusion programme, along with Aaadhar biometric Unique Identity cards that make it easier for the Government to identify social benefit recipients and the widespread use of mobile phones, are driving financial inclusion in India. It is also resulting in cost savings. The fuel subsidy programme, which is the world’s largest cash transfer programme, saved $2 billion (131 billion Rupees) by paying cooking gas consumers directly into their bank accounts, according to a new paper by Columbia University.

Atal Pension Yojana (APY) has been modified to make it more acceptable

Pension scheme Atal Pension Yojana (APY) has been modified to make it more viable and acceptable for informal sector workers with intermittent incomes, an official statement said on Thursday.

The provision of mandatory monthly contributions and penal provisions for non-contribution towards the scheme by subscribers have been removed and the new rules allow individual subscribers to make monthly, quarterly or half yearly contributions instead, a finance ministry statement said.

The discontinuation of monetary contribution towards the pension scheme has been greatly modified in favour of the subscriber, while any account will not be deactivated and closed until the account balance with self-contributions minus the government's co-contributions becomes zero due to deduction of account maintenance charges and fees, the statement added.

Penalty for delayed payment has been simplified to Re.1 per month for a contribution of Rs.100, and the earlier practice of levying different penalties for different slabs has been done away with.

Premature exit from the scheme before 60 years of age was not allowed except in the event of death of terminal illness but now a subscriber can voluntarily exit from the scheme and receive his contribution along with the interest earned on it after deduction of account maintenance charges, the statement said. However, the government's co-contribution along with the interest earned on it will not be paid.

Launched by Prime Minister Narendra Modi in Kolkata in May, APY aims to provide a minimum monthly guaranteed pension to subscribers ranging from Rs.1,000, Rs.2,000, Rs.3,000, Rs.4,000 or Rs.5,000.


India’s retired military men keep interest rates higher in Asia’s third-largest economy?

Will a new multi-billion dollar bill to take care of India’s retired military men keep interest rates higher in Asia’s third-largest economy?

Since New Delhi agreed over the weekend to demands from members of the military for a more generous pension scheme, analysts have aired doubts about the ability of the government to stick to its fiscal plans.

Any concern that the government is unable to stick to its fiscal targets could delay a lowering of interest rates and even a stronger economic recovery, analysts say, because it could convince Reserve Bank of India Governor Raghuram Rajan to put off any further easing.

Mr. Rajan is keeping New Delhi on a tight leash: he has said time and again that a healthy budget is a pre-condition to a more accommodative policy.

The government has in principle accepted what India has been calling the “One Rank One Pension” plan, a demand by defense personnel that the same pension should be paid to armed force retirees with the same rank and the same length of service, regardless of the year they retired.

The move is likely to add significantly on the fiscal bill: economists at HSBC estimate it will cost the country 160 billion rupees, or around $2.5 billion, in the year ending next March alone.

Unfortunately that’s not the only unexpected cost in the country’s books this year. Last month, the finance ministry announced it would be spending 170 billion rupees to recapitalize capital-starved public sector banks. Meanwhile the recent stock market weakness in India and around the world has made it unlikely India will be able to raise the revenues it had planned to pocket by selling stakes in government companies. That could leave another 340 billion rupee shortfall, HSBC estimates.

“All of this means that the path of fiscal consolidation has become harder,” HSBC chief India economist Pranjul Bhandari said in a note Monday.

Some positive factors – including a fall in India’s fuel and fertilizer subsidy bill on the back of falling commodity prices, expenditure reductions and a higher-than-expected dividend from the central bank – will help relieve the pressure for now. But the outlook for next year is less encouraging, economists warn.

India should be able to meet its target of keeping its fiscal deficit at 3.9% of gross domestic product this fiscal year. However if it wants to continue lowering that deficit as planned to 3.5% next year and 3.0% the year, India will need to cut costs and find new sources of revenues, said Nomura in a report Monday.

“Continued fiscal consolidation beyond FY16 will require structurally addressing both the expenditure (deregulating the remaining fuel and fertilizer prices) and revenue side (broaden the tax base) of the fiscal balance,” Nomura said.

Mr. Rajan will be watching closely.  He cut rates three times since the start of the year to the current level of 7.25%, the lowest level India has seen since May 2013.

In a recent interview with the Wall Street Journal he said that the RBI is still in “accommodative mode,” but he quickly added that the bank’s policy will be driven by upcoming news.

“We’re looking at the data to see what more room we have,” he said.


Friday, 21 August 2015

APY Subscribers can make half-yearly, quarterly payments

To increase the subscription of the Atal Pension Yojana (APY) among informal sector workers and make the scheme more viable, the government has modified the flagship programme to give subscribers an option to make contributions on a monthly, quarterly or half-yearly basis, instead of only on a monthly basis earlier.

Also, the provision related to the discontinuation of payment of contribution has been substantially modified in favour of the subscriber, the finance ministry said in a statement on Thursday.

“The account will not be deactivated and closed till the account balance with self-contributions, minus the government co-contributions, becomes zero due to the deduction of account maintenance charges and fees,” it said.
Besides, the penalty on delayed payment has been simplified to just R1 per month for contribution of Rs 100, or part thereof, for each delayed monthly payment instead of different slabs given earlier.

Similarly, a premature exit from the scheme before 60 years of age was not permitted earlier except in exceptional circumstances, — in the event of the death of the beneficiary or terminal disease. Now the modified provision permits the subscriber to voluntarily exit with the condition that he shall only be refunded the contributions made by him to APY, along with the net actual interest earned on his contributions (after deducting the account maintenance charges).

The other condition enabling voluntary exit is that the government co-contribution, and the interest earned on the government co-contribution, shall not be returned to such subscribers.

The APY was launched by Prime Minister Narendra Modi on May 9.


Friday, 7 August 2015

Pensions regulator PFRDA asks banks to process APY contributions quickly

Pensions regulator PFRDA has flayed banks for not adhering to timelines for processing contributions to recently launched Atal pension yojana (APY), which is among the key social security schemes launched by prime minister Narendra Modi in May.

The regulator has a daunting task of getting two crore subscribers for Atal pension yojana by this year end and as of now it has about five lakh subscribers enrolled. And tardy processing of contributions isn’t helping its cause much either. Pension Fund Regulatory and Development Authority (PFRDA) administers the scheme and the institutional architecture of NPS is being utilised to enroll subscribers under Atal pension yojana.

In June 2015, there were several instances where subscriber contributions were delayed. PFRDA has warned that any overdue interest or subscriber compensation due to delay in processing may have to be borne by the concerned bank.

Under the schemes’ rules, banks are required to collect additional amount for delayed payments, such amount will vary from minimum Rs. 1 per month to Rs 10 per month.

Banks get an incentive for mobilising new accounts under Atal pension yojana and for promotion and development of the scheme as well. Under this particular scheme, a minimum pension amount is guaranteed by the government on the premise that certain parametres are met as per the guidelines. This is why timely remittance of funds and investment are crucial.

“It was observed that during June 2015, there were several instances where these timelines were not adhered by the banks. It may be noted that the delayed upload of contribution had also an adverse impact by way of overdue interest or increased monthly contribution for the subscribers due to change of age during the period of delay,” PFRDA said.

For example, a guaranteed Rs 5,000 monthly pension for a 35-year-old will require monthly investment of Rs 902. However, if the subscriber turns 36 during the period of delay, he/she will have to pay Rs 990 per month. PFRDA directed all the banks to adopt measures that will "streamline the process of contribution upload as per timelines."

Banks are required to generate the Permanent Retirement Account Number (PRAN) immediately after submission of applications and the subscribers are to be provided with acknowledgment slip indicating the pension amount opted and PRAN.

PFRDA directed banks to upload files containing subscriber’s data and remittance of funds collected on the second day of PRAN generation. By the fourth day, contributions should be matched and booked and units need to be allotted.


Saturday, 18 July 2015

In July India's pension fund to start equity investments

NEW DELHI: Starting in July, India's state-run pension and social security fund will invest about $800 million in equities in the current fiscal year, labour minister Bandaru Dattatreya said, in a long-awaited move that may help finance an ambitious privatization programme.

The more than $100 billion Employees' Provident Fund Organisation (EPFO) intends to place an initial 1 per cent of its investments in exchange traded funds, increasing to 5 per cent of the annual total in equity products by March 31.



Defence minister Manohar Parrikar on Thursday said that Army can expect ‘good news soon’ on the issue of one rank, one pension (OROP). In the city for cantonment board meeting, the minister said: “Our commitment to implement the OROP remains intact. I cleared the file as soon as it came to my notice.”

When asked whether the issue could be put before Parliament in the monsoon session starting July 21, the minister said that it was difficult to give a time frame, as many ministries and departments are involved in its implementation.

“Since issues like OROP involve more than one ministry, there cannot be any time-frame for its implementation. I do not put myself in restrictive time-frame. It will be implemented soon, but how soon, I cannot tell. My department followed the time-frame despite difficulties,” he said.

Ex-servicemen have been protesting since June 14 to press for the implementation of OROP. At present, pension of retired army personnel is based on the pay commission recommendations at the time of their retirement. This leads to difference in pension for officers of the same rank who retire on different dates.

With OROP, those who retired earlier will draw the same pension as officers and jawans of the same rank who are retiring now. They would also be entitled to a year’s back pension at the new rate, which would be a windfall for pensioners.

The system will benefit 25 lakh ex-servicemen, and is expected to cost the government around Rs 8,500 crore.


Saturday, 4 July 2015

PFRDA asked subscribers of NPS Swavalamban scheme to join the Atal pension yojana (APY)

Pension fund regulator PFRDA has asked subscribers of NPS Swavalamban scheme to join the Atal pension yojana (APY), which offers guaranteed minimum monthly pension of Rs 1,000-5,000 to the subscriber after 60 years.

NPS Swabhalamban scheme has significant amount of subscribers and if all them opt for newly launched Atal pension yojana, it will help PFRDA reach the 2-crore subscriber target for this year. NPS Lite and Swavalamban schemes combined have about 45 lakh subscribers with assets under management of over Rs 1,700 crore.

Both Swavalamban and APY schemes are quite similar in certain aspects. The NPS-Swavalamban model is designed to ensure ultra-low administrative and transactional costs, so as to make small investments viable.

Like the recently-launched Atal pension yojana, in Swavalamban also government contributes Rs 1000 per year to each account for five years. A Swavalamban account opened in the period 2013-2014 to 2016-2017 for example get the Swavalamban benefit up to 2016-17.

In the APY, the government would co-contribute 50 per cent of the total contribution or Rs 1000 per annum, whichever is lower, to eligible subscribers. Government co-contribution is available for five years, i.e. from 2015-16 to 2019-20 for the subscribers who join the scheme during the period from 1st June, 2015 to 31st December, 2015 and who are not covered by any statutory social security schemes and are not income tax payers.

"All subscribers of Swavalamban scheme between 18-40 years of age can opt to migrate to Atal Pension Yojana through their bank account," PFRDA said in a communique. "(Such) subscribers between 18 to 40 years of age may approach their bank branches to submit the APY application along with PRAN (permanent retirement account number) card for migration to Atal pension yojana.

The subscribers’ PRAN issued under Swavalamban scheme would continue to be retained in APY and new PRAN will not be issued," the pension fund regulator said. Swavalamban scheme subscribers without bank account will have to open a bank account and simultaneously submit the request for migration from Swavalamban to the Atal pension yojana to the bank, it added.


Friday, 19 June 2015

Atal Pension Yojana (APY) is a National Pension Scheme (NPS) Rules and FAQs

Atal Pension Yojana (APY) – Scheme Details

The Government of India is extremely concerned about the old age income security of the working poor and is focused on encouraging and enabling them to join the National Pension System (NPS). To address the longevity risks among the workers in unorganised sector and to encourage the workers in unorganised sector to voluntarily save for their retirement, who constitute 88% of the total labour force of 47.29 crore as per the 66th Round of NSSO Survey of 2011-12, but do not have any formal pension provision, the Government had started the Swavalamban Scheme in 2010-11. However, coverage under Swavalamban Scheme is inadequate mainly due to lack of guaranteed pension benefits at the age of 60 therefore, announced a new initiative called Atal Pension Yojana with guaranteed pension benefits. The new scheme is scheduled for launch on 1st June 2015. The Scheme is designed to convert the pension less society into pensioned society.

  1.      The APY will be applicable on all citizens of the country in the unorganised sector and the scheme is administered by the Pension Fund Regulatory and Development Authority (PFRDA) through NPS. An income tax payer or who is covered under statutory social security schemes can also join APY but those subscribers will not be eligible for GoI co- contribution.
  2.      The Statutory Social Security Schemes not eligible for receiving Government Co- contribution under APY are as mentioned below:
  •      Employees’ Provident Fund and Miscellaneous Provisions Act,1952
  •      The Coal Mines Provident Fund and Miscellaneous Provisions Act,1948
  •      The Seamen’s Provident Fund Act, 1966
  •      The Assam Tea Plantations Provident Fund and Pension Fund Scheme Act ,1955
  •      The Jammu and Kashmir Employees’ Provident Fund Act, 1961.

  1.         Under the APY, subscribers would receive a fixed monthly pension of Rs. 1000 , Rs. 2000, Rs. 3000 , Rs. 4000 , Rs. 5000 at the age of 60 years, depending on their contributions, which itself would vary according to the age of joining the scheme. The minimum age of joining APY is 18 years and maximum age is 40 years. Therefore, minimum period of contribution by any subscriber under APY would be 20 years or more.
  2.      The APY will be applicable to all persons in the unorganised sector, who are not a part of any statutory social security schemes, subject to the condition that the benefit of Central Government Co-Contribution of 50 % of the subscriber contribution or Rs 1000 per annum, whichever is less, would be available to the subscribers for a period of 5 years, i.e from 2015-16 to 2019-20, who joins the NPS before 31st December, 2015 and who are not income tax payers. The existing Swavalamban subscriber, if eligible, may be automatically migrated to APY with an option to opt out.
  3. However, the benefit of five years of government Co- contribution under APY would not exceed 5 years for all subscribers. This would imply that if, as a Swavalamban beneficiary, he has received the benefit of government Co-Contribution of 1 year, then the Government co-contribution under APY would be available only 4 years and so on. Existing Swavalamban beneficiaries opting out from the proposed APY will be given Government co-contribution till 2016-17, if eligible, and the NPS Swavalamban continued till such people attained the age of exit under that scheme.
  4.      The existing Swavalamban subscribers between 18-40 years will be automatically migrated to APY. For seamless migration to the new scheme, the associated aggregator will facilitate those subscribers for completing the process of migration. Those subscribers may also approach the nearest authorised bank branch for shifting their Swavalamban account into APY with PRAN details.
  5.      The Swavalamban subscribers who are beyond the age of 40 and do not wish to continue may opt out the Swavalamban scheme by complete withdrawal of entire amount in lump sum, or may prefer to continue till 60 years to be eligible for annuities there under.
  6.      The prospective subscribers wish to join the scheme will have option to join the NPS as an individual as per the existing arrangements through Point of Presence (PoP) or through Aggregator, the applicant should have Aadhar and valid mobile number. Aadhar and mobile numbers are pre requisites for becoming part of APY. The prospective subscribers may also join the scheme without Aadhar but it should be submitted subsequently.
  7.      For joining the scheme, the prospective applicant should have a bank account or open an account. The bank account is to have facility of auto debit for enabling standing instructions to transfer the contributions on periodical basis, this will lead to reduction in contribution collection charges. The subscribers should keep the required balance in their savings bank accounts on the stipulated due dates to avoid any late payment penalty. Due dates for monthly contribution payment is arrived based on the deposit of first contribution amount. In case of repeated defaults for specified period, the account is liable for foreclosure and the GoI co-contributions, if any shall be forfeited. Also any false declaration about his/her eligibility for benefits under this scheme for whatsoever reason, the entire government contribution shall be forfeited along with the penal interest.
  8.      Under APY, the individual subscribers shall have an option to make the contribution on a monthly basis. Banks are required to collect additional amount for delayed payments, such amount will vary from minimum Re 1 per month to Rs 10/- per month as shown below:
  •      Re. 1 per month for contribution upto Rs. 100 per month.
  •      Re. 2 per month for contribution upto Rs. 101 to 500/- per month.
  •      Re 5 per month for contribution between Rs 501/- to 1000/- per month. iv. Rs 10 per month for    contribution beyond Rs 1001/- per month.
     9.       The fixed amount of interest/penalty will remain as part of the pension corpus of the subscriber.

    Operation of additional amount for delayed payments:
  1.         APY module will raise demand on the due date and continue to raise demand till the amount is recovered from the subscriber’s account.
  2.         The due date for recovery of monthly contribution may be treated as the first day /or any other day during the calendar month for each subscriber. Bank can recover amount any day till the last day of the month. It will imply that contribution are recovered as and when funds are available any point during the month.
  3.         Monthly contribution will be recovered on FIFO basis- earliest due instalment will recovered first along with the fixed amount of charges as mentioned above.
  4.         More than one monthly contribution can be recovered in month subject to availability of the funds. Monthly contribution will be recovered along with the monthly fixed due amount, if any. In all cases, the contribution to be recovered along with the fixed charges. This will be banks’ internal process. The due amount will be recovered as an when funds are available in the account.
  5.      The banks should ensure transfer the accumulated contributions under APY on the second day to the Trustee Bank which will in turn transfer the amount for further investment as per existing PFRDA regulations applicable for Trustee Bank.
  6.      All bank branches of Public/Private under CBS will be sourcing APY accounts and the banks will be adequately compensated for mobilization of eligible accounts as an incentive.
  7.      The banks may employ BCs/Existing non – banking aggregators, micro insurance agents, and mutual fund agents as enablers for operational activities. The banks may share the incentives received by them from PFRDA/GoI as deemed appropriate.
  8.      The subscribers shall submit the required application to the bank for enrolling under APY along with the required monthly contribution amount for the monthly guaranteed pension which is opted for.
  9.      The subscribers of APY, if they subsequently become part of any social statutory schemes, should inform the bank and opt out of the scheme with immediate effect. Those subscribers may also transfer APY account into other variants of NPS as per terms/conditions stipulated for the respective scheme. If they have decided to exit from the scheme, the GoI co-contribution shall be forfeited and own contribution will be refunded.
  10.      The amount collected under APY are managed by Pension Funds appointed by PFRDA as per the investment pattern specified by GoI. The subscriber has no option to choose either the investment pattern or Pension Fund.
  11.      APY scheme provides guaranteed pension for the subscriber and to the spouse with return of corpus to the nominees. Hence, the spouse details and nominee details are to be captured while sourcing the accounts, or to be updated as per requirement, along with their Aadhar to obviate any dispute regarding pension entitlements.
  12.      The subscribers are required to opt for a pension from Rs 1000- Rs5000 as per the chart and ensure payment of stipulated monthly contribution regularly. The subscribers can opt to decrease or increase pension amount during the course of accumulation phase. However, the switching option shall be provided once in year during the month of April.
  13.      Detailed APY contribution chart for different age level shall be supplied by PFRDA to all the banks for reference.
  14.      Each subscriber will be provided with an acknowledgement slip after joining APY which would invariably record the guaranteed pension amount, due date of contribution payment, PRAN etc. In case of defaulted payment for a month, the overdue amount will be recovered in the subsequent months along with penalty. For any gap in contribution subscriber can rejoin only with the pending contribution and the penal rate of interest /penalty.
  15.      Upon completion of 60 years, the subscribers will submit the request to the associated bank for drawing the guaranteed pension.
  16.      APY accounts opened from 1/6/2015 – 31/12/2015 are eligible for GoI co-contribution at the rate of 50% of the subscriber contribution amount with a cap of Rs 1000 per annum. However the scheme will continue after this date but Govt. Co-contribution will not be available. The GoI co-contribution is payable to eligible PRANs by PFRDA after receiving the confirmation from Central Record Keeping Agency at such periodicity as may be decided by PFRDA.
  17.      Periodical information to the subscribers regarding balance in the account, contribution credits etc. will be intimated to APY subscribers by way of SMS alerts. The subscribers will have the option to change the non – financial details like nominee’s name, address, phone number etc whenever required.
  18.      All subscribers under APY remain connected on their mobile so that timely SMS alerts can be provided to them at the time of making their subscription, auto-debit of their accounts and the balance in their accounts.
  19.      All banks to be registered with PFRDA and all their branches to act as the Points of Presence/collection directly from the subscribers or indirectly through the BCs including the NBFCs, MFIs and individuals to be appointed as BCs by the banks.
  20.      Banks will have the choice of uploading the data/information from individual branches or from their nodal centres depending on the nature of connectivity with the CRA with due regard to ease of operations.
  21.      Since APY is based on defined benefits, the Government co-contribution under APY, the gap funding incase of any deficit in the pension corpus of subscriber in granting fixed pension and promotional and development expenditure will be funded by grants from Government of India. Actuarial valuation shall be conducted on every 2-3 year to arrive at any gap may be fully provided for.
  22.      PFRDA may permit members of an existing non statutory social security scheme to migrate to NPS under such terms and condition as may be approved by the Government.

Sunday, 14 June 2015

Atal Pension Yojana to boost New Pension System corpus by Rs 50K crore

MUMBAI: Pension fund regulator PFRDA is hopeful of increasing the corpus of New Pension System (NPS) by Rs 40,000-50,000 crore by the fiscal-end, driven by subscription to a newly launched social security scheme.

The Centre has launched Atal Pension Yojana (APY) targeted at people in the unorganised sector who wish to join NPS and are not a member of any other social security plan.

Assets under management (AUM) of NPS currently stands at around Rs 89,000 crore. The NPS corpus grew by 38 per cent over 2013-14 to around Rs 25,000 crore in 2014-15.

"We expect the AUM of NPS to grow by Rs 40,000-50,000 crore by the fiscal-end, which will be driven by the newly launched social security scheme Atal Pension Yojana," Pension Fund Regulatory and Development Authority (PFRDA) Chairman Hemant Contractor said this evening.

"Right now we have around 85 lakh accounts under NPS of which 17-18 lakh accounts were opened last year. The last one year's return for NPS was around 11.5 per cent," he told reporters on the sidelines of an event at BSE here.

Three social security schemes, including APY, were launched by Prime Minister Narendra Modi in Kolkata in May.

However, unlike two of them - Pradhan Mantri Jeewan Jyoti Bima Yojana and Pradhan Mantri Suraksha Bima Yojana - which have seen issuance of 10 crore insurance policies, APY has received lukewarm response (2.15 lakh accounts so far).

Elaborating on it, Contractor said, "We have been able to open 2.15 lakh accounts under APY within a period of 20 days since its launch."

Citing the reason for slow pace of subscription, he said, "Actually what happened was that the two insurance schemes were launched first and the Atal Pension Yojana was launched after 10 days.

"So, the initial momentum was towards the insurance schemes. And insurance, all said and done, is a simple product. In comparison to that, pension is a little expensive and also complicated product which needs to be explained to the customers," said Contractor, a former State Bank of India Managing Director.

"However, we are ambitious on APY now as we are hopeful of opening two crore accounts under the scheme by the fiscal-end," he said, adding "with all tax breaks (announced in the Budget 2015-16), we expect to get more NPS subscribers too."


Wednesday, 10 June 2015

6.7 cr people enrolled under 3 social security schemes in india

Nearly seven crore people have been enrolled as on day under the three social security schemes launched by Prime Minister Narandra Modi.

Last week, Prime Minister Narendra Modi had launched three schemes -- Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY), Pradhan Mantri Suraksha Bima Yojana (PMSBY) and Atal Pension Yojana (APY).

"They started in May 9 and today we are on. As of yesterday evening, PMSBY has reached 5.19 crore policies. In districts and countrysides it is a runaway success," Finance Minister Arun Jaitley told reporters.

PMSBY will offer a renewable one-year accidental death-cum-disability cover of Rs 2 lakh for partial/permanent disability to all savings bank account holders in the age group of 18-70 years for a premium of Rs 12 per annum per subscriber. The scheme is managed by general insurance firms.

Taking into account enrollment in other two schemes, the number has touched 6.7 crore.

The enrollment under the life insurance scheme PMJJBY handled by LIC has crossed 1.59 crore in 5 days, he said.

Under the pension scheme, APY as many as 70,000 people have joined, he added.

"Insurance social security schemes if they are a runaway success and if they have huge acceptability, then we are going to see how they can be strengthened in future," he added.

PMJJBY on the other hand will offer a renewable one year life cover of Rs 2 lakh to all savings bank account holders in the age group of 18-50 years, covering death due to any reason, for a premium of Rs 330 per annum per subscriber.

The scheme would be offered or administered through LIC or other Life Insurance companies willing to offer the product on similar terms on the choice of the bank concerned.

The pension scheme will focus on the unorganised sector and provide subscribers a fixed minimum pension of Rs 1,000, 2,000, 3,000, 4,000 or Rs 5,000 per month starting at the age of 60 years, depending on the contribution option exercised on entering at an age between 18 and 40 years.

The period of contribution by any subscriber under APY would be 20 years or more.

The fixed minimum pension would be guaranteed by the government.


Saturday, 9 May 2015

PM Modi to launch social security insurance, pension schemes on May 9

On the lines of Jan Dhan mega rollout, Prime Minister Narendra Modi will launch on May 9 social security insurance and pension schemes in Kolkata, while other ministers will unveil them in different cities.

"There would be simultaneous functions across various states with participations from chief ministers and cabinet ministers. It would be like Jan Dhan scheme launch so that we have maximum awareness in minimum time," Department of Financial Services Secretary Hasmukh Adhia told PTI.

"The enrolment for insurance and pension schemes would begin after Prime Minister launches them. However, the insurance cover would be enforced from June 1," he said.

As it will be linked to bank accounts, the premium would get auto debited, Adhia said.

These schemes, to be launched by Modi, are aimed at providing affordable universal access to essential social security protection in a convenient manner linked to auto- debit facility from the bank account of a subscriber, as per a Finance Ministry statement.

These schemes were announced in the Budget by Finance Minister Arun Jaitley on February 28.

The two insurance schemes -- Pradhan Mantri Suraksha Bima Yojana (PMSBY) and Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) -- will provide insurance cover in case of death as well as death/disability due to an accident. The pension scheme, Atal Pension Yojana (APY), will address old age income security needs.

PMSBY will offer a renewable one year accidental death-cum -disability cover of Rs 2 lakh for partial/permanent disability to all savings bank account holders in the age group of 18-70 years for a premium of Rs 12 per annum per subscriber.

The scheme would be administered through Public Sector General Insurance Companies or other General Insurance companies willing to offer the product on similar terms on the choice of the bank concerned, it added.

PMJJBY on the other hand will offer a renewable one year life cover of Rs 2 lakh to all savings bank account holders in the age group of 18-50 years, covering death due to any reason, for a premium of Rs 330 per annum per subscriber.

The scheme would be offered or administered through LIC or other Life Insurance companies willing to offer the product on similar terms on the choice of the bank concerned.

The pension scheme will focus on the unorganised sector and provide subscribers a fixed minimum pension of Rs 1,000, 2,000, 3,000, 4,000 or Rs 5,000 per month starting at the age of 60 years, depending on the contribution option exercised on entering at an age between 18 and 40 years.

The period of contribution by any subscriber under APY would be 20 years or more.

The fixed minimum pension would be guaranteed by the government.


Sunday, 3 May 2015

Will turn Telangana into ‘golden state’, vows KCR

HYDERABAD: Telangana chief minister K Chandrasekhar Rao on Friday vowed to turn the newly-created Telangana into a 'golden state' by implementing more welfare and development schemes in the next four years.

Addressing the plenary of Telangana Rashtra Samiti here, he said the welfare of all weaker sections, who constitute an overwhelming majority of the state, was the objective of his government.

Rao reiterated that TRS will not seek votes in the next elections if it failed it supply drinking water to every household. He also promised to complete all pending irrigation projects in four years.

For Rao, who was re-elected as party president for the eight consecutive term, it was an event to stamp his authority on a party he founded 14 years ago. It was also an occasion for the chief minister to remind the central government of the promises it needs to keep to the youngest state in the country.

For the party leaders and cadre, it was an occasion to revisit their promises to the people, reaffirm their belief in the ruling party and return home at the end of the day with reinvigorated enthusiasm.

In one of the significant resolutions passed at the plenary, the party demanded that the Centre fulfill assurances made in the AP Reorganization Act 2014 for the Telangana state.

The party passed a resolution, moved by its MP A P Jitender Reddy, urging the Centre to come good on all its promises including setting up of a tribal university, AIIMS, horticulture university, an integrated steel plant in Khammam, rail coach factory and increasing the number of assembly seats to 153 from 119.

The day-long plenary passed 12 resolutions on various issues, hailing various development and welfare schemes launched by the government.

A resolution urged the central government to fulfil all promises made to Telangana at the time of bifurcation of Andhra Pradesh.

Through another resolution, the party vowed to develop Hyderabad as a world-class city. The chief minister said though the successive governments claimed to have developed the city, many areas lacked basic civic amenities.

Finance minister Etela Rajender proposed a resolution on current politics and TRS. He said with separate state now a reality, the goal now should be to create 'Bangaru Telangana' under Chandrasekhar Rao's leadership.

The other resolutions passed at the plenary included making the state power surplus by 2018, Haritha Haram, Telangana drinking water scheme (watergrid) and information technology, irrigation, Mission Kakatiya and schemes being implemented by the state such as Aasara pension, Kalyana Laxmi, Telangana martyrs welfare, and other welfare schemes.

Earlier in the day, home minister Nayani Narasimha Reddy, who supervised poll for the party president post, announced that KCR's was elected unopposed amid thunderous applause from the gathering.

"I am grateful to my colleagues for reposing faith in me and giving opportunity to lead the party for one more term. I thank one and all for the unanimous election," the chief minister told the plenary attended by over 50,000 party functionaries, senior leaders, ministers, MPs and other public representatives.

The TRS women's wing led by Nizamabad MP K Kavitha felicitated KCR by presenting him a 'Bathukamma'. Senior leaders made a beeline to congratulate him.

Addressing the plenary, Chandrasekhar Rao listed out his government's achievements in the past ten months and said his party would not seek votes in the next elections if it fails to fulfill the promises made during the last polls. He also called upon NRIs from Telangana to give away their land in the state so that it can be distributed to the landless dalits.

The chief minister said surmounting the power supply crisis was one his government's major achievements. "We have overcome the power crisis and the state is now free of power cuts," he said.

Referring to the angst of lakhs of unemployed youth in the state, he called upon them not to be disappointed as his government was planning to fill up on lakh vacancies in various government departments. Services of the contract employees would be regularized soon after the ongoing process of employees' distribution between Telangana and Andhra Pradesh gets over.

Articulating his plans for Hyderabad, KCR said his government was ready with a comprehensive plan to turn the state capital into a 'world-class' city. The metro rail project would be extended to the Shamshabad airport and cover outskirts like Ramchandrapuram and Ibrahimpatnam, the CM added.


Rs 3,350 Cr for Pensions under Aasara, Says Telangana State CM

HYDERABAD: Chief Minister K Chandrasekhar Rao assured the State Assembly that all eligible people would be given pension under Aasara Pension Scheme.

“The government will spend Rs  3,350 crore every year on payment of pensions under the new scheme. This is 380 per cent increase over the previous years. In the past Rs 881.23 crore a year was spent by the erstwhile government”, the Chief Minister said.

In a statement in the Assembly, Chief Minister said in all the 10 districts, nearly 39,63,000 applications have been received for sanction of pensions and government officials have taken up verification of eligible persons for sanction of Aasara pensions.

The process of verification and sanction of fresh pensions is still in progress. So far 24,21,000 eligible beneficiaries have been identified for granting Aasara pensions. Rao asserted that his government’s aim was to extend this benefit to all the eligible people.

In view of increasing prices and cost of living, APS was conceived to provide security and help the aged and poor, he stated.

The government has also enhanced monthly pensions from Rs  200 to Rs  1,000 for old persons, widows, weavers, toddy tappers and AIDS patients while for physically challenged persons it has been increased from Rs  500 to Rs  1,500 a month.

Pension amounts given to different categories of beneficiaries would be the highest in Telangana when compared to other States. When the opposition parties demanded a detailed discussion on the pensions issue, Speaker S Madhusudan Chary said the issue would be taken up on Thursday.


Tuesday, 21 April 2015

EPF-95 beneficiaries' pension faces cut

Pension received by the beneficiaries of the Employees Provident Scheme, 1995, has gone back from Rs 1,000 per month to Rs 50-Rs 800 from the commencement of the new financial year. This is due to the fact that the central government had decided to give the raised amount as pension only for 2014-15. The Centre has, however, directed the provident fund department not to process the pension of the beneficiaries till further orders are released.

"The provident fund office has been asked to withhold the calculation of pension to the beneficiaries till further notice. It is believed that the Government of India will soon revise its order on giving pension of Rs 1,000 per month to the beneficiaries of the scheme for this year as well. The Centre is likely to issue new orders to ensure that the pension remains Rs 1,000 per month," a senior official from the provident fund office said.

"We process the pensions on the 25th of every month. Accordingly, we will wait till the government decides to continue with last year's raise. We hope the orders to reach us latest by the 28th of the month, following which, pension may be made available by the 3rd of the next month," the official said.

The pensioners, however, have been demanding that their pension be revised to Rs 6,000 per month, along with the dearness allowance. "We have decided to agitate for rise in pension. We have urged the government to go by the recommendations of the Koshiari Committee, which had recommended a pension of Rs 3,000 per month along with the dearness allowance," said Prashant Deshmukh, general secretary of the federation of pensioners, district unit.


Monday, 20 April 2015

Dabur, RUDSETI launches Swavalamban to train village youth

NEW DELHI: Consumer products maker Dabur India, in association with Rural Development and Self-Employment Training Institute (RUDSETI), has announced the launch of an initiative aimed at improving the employability of youth from villages by providing free technical training and skill development.

The programme, Swavalamban, is aimed at providing not only training to rural youth in three key areas of sales, merchandising and promotion but also guaranteed employment after the training.

Announcing the launch of the social initiative on April 13, Dabur India's head-global human capital and CSR (corporate social responsibility), A Sudhakar said, "As a country, India will also have a strong surplus in working population (age 15-50) by 2020, which should help us maintain the momentum on this growth story. A significant portion of this demographic dividend lies in rural areas, which will be one of the important growth engines in future."

To leverage this advantage, it is imperative that companies focus on skill building and vocational training to make the youth employable in the organised sector, said Sudhakar.

The objective of this initiative is to identify the training needs of the rural youth, provide training through a well-planned and designed curriculum, engage youth in business process and contribute to nation building and economic development of the country, said the company's release.

Speaking on the occasion, KP Pant, director, RUDSETI-Ghaziabad, said, "Looking at the great demand for skilled personnel in the area of merchandising, sales and trade promotion in the area a new course has been developed in association with Dabur India, wherein we expect to train unemployed and unskilled youth. We are very optimistic that at the end of the intervention and after imbibing the requisite skills, these youth will be absorbed by the industry."


A new pension scheme only for labourers

The Central Government has restructured its Swavalamban pension scheme for labourers in the unorganised sector. Auto and taxi drivers, construction workers, domestic helps etc can benefit from the scheme.

The new pension scheme, called Atal Pension Yojana, would be different from the existing Swavalamban pension and would come into effect from June 1. While the former pension scheme never gave an idea on how much one would receive as pension or how much one could earn, the new scheme offers a guaranteed income to members after they attain 60 years of age.

Nominee services are available and the nominee would get the full savings, along with pension, if the pension holder expires.

Those in the age group of 18 to 40 can join and the scheme is meant for those who do not receive gratuity, provident fund benefits etc. The accounts may be opened in banks that have been authorised to open them. The amount that one has to deposit would depend on how much one expects as pension and the years remaining to attain 60 years of age.

Details of the programme would be published soon. Those who have enrolled in the Swavalamban scheme can switch to the new plan easily.

As per the new scheme, 50 per cent of the amount that a member deposits in the plan annually would be matched by the government - up to a maximum of Rs 1,000 - for the first five years. This would be available for those who deposit at least Rs 2,000 a year. The annual rate of interest would be eight per cent.

A person 18 years of age has to deposit Rs 210 a month until he/she is 60 years of age to receive a monthly pension of Rs 5,000. Those who pay taxes cannot join the scheme and the scheme would be managed by the Pension Fund Regulatory Authority.


Thursday, 16 April 2015

Under Atal Pension Yojana, govt to guarantee up to Rs 5,000 cover

The government will give guaranteed pension of up to Rs 5,000 a month to subscribers under the proposed Atal Pension Yojana and will also allow members of the NPS Swavalamban to migrate to the new scheme.

“There will be five guaranteed pensions and subscribers can opt to join any of these schemes. At the age of 60, when the plan matures, a person opting for the scheme will get a guaranteed return,” said Hemant Contractor, chairman of the Pension Fund Regulatory and Development Authority (PFRDA).

The schemes would give a minimum monthly pension of Rs 1,000, Rs 2,000, Rs 3,000, Rs 4,000 and Rs 5,000, he added.

Contributions would vary from as little as Rs 48 a month for a Rs 1,000 pension to Rs 248 a month for a pension of Rs 5,000 per month. Individuals between the age of 20 years and 40 years of age with operational bank accounts would be eligible.

The plan to launch the Atal Pension Yojana was announced by finance minister Arun Jaitley in the Union Budget 2015-16. “We will also launch the Atal Pension Yojana, which will provide a defined pension, depending on the contribution, and its period,” he had announced on February 28.

Under the scheme, the government will contribute 50 per cent of the beneficiaries’ premium limited to Rs 1,000 each year, for five years, in the new accounts opened before December 31, 2015. Investments under the proposed scheme would be done on the guidelines of the new investment pattern for pension funds that will be notified from April 1 this year. It is estimated to give a return of at least 8 per cent per year.

To subscribe to the scheme, workers would be expected to have an operational bank account and banks would be the points of presence or aggregators for the scheme. The proposed Atal Pension Yojana will be one of the key issues to be taken up when the finance minister meets public sector banks on Wednesday. Additionally, the 36 lakh subscribers under the existing NPS Swavalamban would have an option to migrate to the scheme. “But unlike the proposed Atal Pension Yojana, the Swavalamban does not provide a minimum guaranteed pension,” Contractor told The Indian Express.

Under the Swavalamban, aimed at unorganised sector workers, the government contributes Rs 1,000 every year for a period of five years who opened accounts between 2010-11 and 2012-13.


PFRDA chief eyes 20% coverage of the poor by FY18

Pension fund regulator PFRDA today said it aims at increasing pension coverage for the deprived section to 15-20 per cent over the next few years.

“Today pension coverage in the unorganised sector is a poor 3-4 per cent and we want to take it to 15-20 per cent in the next two-three years,” Pension Fund Regulatory and Development Authority (PFRDA) Chairman Hemant Contractor told reporters on the sidelines of an event here.

He said the Swavalamban scheme, which is a part of the Jan Dhan Yojana, is likely to bring in more people from the vulnerable sections under the ambit of formal pension system.

Swavalamban is a government’s initiative wherein it co-contributes Rs 1,000 per annum to all eligible pension accounts.

“The Swavalamban scheme will be included in the second phase of the financial inclusion drive .. after this we should be able to see much faster growth in coverage for the unorganised sector,” Contractor said, adding so far, around 36-37 lakh subscribers have opened accounts under the Swavalmban scheme.

He also has asked the government to continue with its contribution of Rs 1,000 for a longer period.

“In the Swavalamban scheme, the government makes a co-contribution of Rs 1,000 and it is valid till 2016-17. So, we have made a request that they should continue (to make investment) for next 20-25 years,” Contractor said.

He said total pension corpus stands at Rs 80,000 crore currently and it can increase further given the large section of the public still uncovered.

To a query over the possibility of merging the two retirement savings-the Employee Provident Fund (EPF) and New Pension Scheme (NPS), he said there is no such proposal.

The regulator is widening the scope and the coverage of the instruments that could be included for investment under the corporate bonds portfolio, he said adding, “I don’t see any appetite for corporate bonds diminishing going forward.”

PFRDA has asked the government to change tax status given to pension scheme and make it at par with EPFO and PPF.

“We currently have a EET (exempt exempt taxed) status and we have asked for a EEE (exempt, exempt, exempt) status like EPF and PPF accounts enjoy. The government is examining it,” Contractor said.


Tuesday, 14 April 2015

Govt employees may get to choose their fund managers in NPS

 New Delhi, April 13: 

Pension regulator PFRDA may allow Union and State government employees the flexibility to choose their own fund managers for managing their corpus in the National Pension System (NPS).

Such a move will bring the employees on par with private individual subscribers, who already enjoy the facility to choose their fund managers.

“The plan to provide choice to government employees for deciding their fund managers is consistent with the design of NPS architecture as a subscriber-centric model,” RV Verma, PFRDA Member, told BusinessLine.

As on date, over 70 per cent of the NPS corpus of ₹82,000 crore comprises contributions from Union and State government employees.

Currently, it is the Centre or the State government that chooses the fund manager for the NPS contributions.

Empowering the subscriber to choose the fund manager will allow these government employees the option to take risk and maximise pension, according to Verma.

The facility of switching from one fund manager to another is also proposed to be provided, he said, adding that this will ensure that pension fund managers do not become complacent.

Verma also said the plan to provide choice to government employees is also in line with the Bajpai panel’s recommendations to widen choice for NPS subscribers — whether it be in the case of fund managers or the basket of instruments in which funds could be parked.

Add on choice

“The existing system (of government deciding the fund managers) will continue. We are only going to add choice to the government employees who are NPS subscribers,” Verma said.

In 2004, the Centre had moved away from defined benefit pension system to a defined contribution pension system.

All new entrants into government service after January 1, 2004, had to mandatorily go in for NPS.

Currently, the Centre and 27 States have adopted NPS.


Saturday, 11 April 2015

The National Pension System needs a big push

The National Pension System (NPS) is not used to getting an easy pass. When the 2015-16 Budget announced an exclusive tax sop of Rs.50,000 for NPS, even the pension regulator was surprised. The birthing of a national pension system for all of working India—and not just those lucky enough to be incumbents in jobs that offer them the questionable shelter of an inefficient and opaque corpus targeting vehicle called the Employees’ Provident Fund (EPF)—has been fraught with problems. But the passing of the Pension Fund Regulatory and Development Authority (PFRDA) Bill almost a decade after it was first tabled seems to have opened the doors for much needed reform in the pension space in India.

The increase in the deduction limit was not the only surprise in the budget speech. The second big surprise was the initiation of the process that will give the choice between EPF and NPS to employees. Why is NPS superior? For one, it exposes long-term savings of subscribers of the scheme to the bump of returns only possible with equity investments. It does this in a sensible manner by cutting out Rambo fund managers and sticking to the safety of index funds. The average annual index return since the beginning of the Sensex is 17.43%. Other than offering a superior pension product, the government’s push to NPS is shaking the EPF organization out of its monopolist sloth and slumber.
There are, however, problems that NPS is still to resolve. The biggest one is its being back-loaded at the moment. It arises mainly from the lack of a developed annuity market in India. The NPS product gives 60% of a subscriber’s corpus at age 60 as a lump sum and 40% becomes a lifetime annuity.

The lack of an efficient annuity market leaves the money in the hands of the state insurer not known for either its efficiency or its transparency on products. The other big problem is the differential in the taxation rules between EPF and NPS. The former follows the exempt exempt exempt pattern—an investment under EPF is exempt from tax during investment, accumulation and exit phases. NPS attracts tax at exit—both the 60% corpus and the annuity components are taxable. But NPS wins over the tax-unfriendly regime it faces by offering higher returns. One calculation puts the extra return that NPS needs to earn at about one percentage point higher than EPF to nullify the tax difference. This is achievable. The five-year average return on the government bond fund in NPS is 9.09%, on the corporate bond fund it is 10.65% and on the equity fund the return is 13.25%. If one compares this with the average EPF return since FY10 at 8.7%, returns on NPS look much better. If NPS, after accounting for the tax differential, gives just one percentage point over EPF, the difference in return over a 40-year period is over 30%.

If problems with NPS are solvable, what lies ahead for the product? Two steps need to be taken. One, the pension regulator, Hemant Contractor, should now work to get the armed forces included in this state of the art pension system and move the over 1.3 milllion workforce from a defined benefit system to a defined contribution one. One must remember that parity is what the one-rank-one-pension argument has been all about. Parity will mean the defence forces personnel get the same pension system as the Union government employees who have been with NPS since 2004. Two, the government needs to give NPS the Jan Dhan advertising push.

No state pension system in the world has run without a big information push by governments. A big bang advertising push that takes the product to the masses is needed to make the product familiar. But we must remember that NPS is a wholesale product and must be sold to aggregators, companies and associations, rather than to individuals. Those in the pension policy space must stop trying to emulate front end incentives to make NPS a me-too mutual fund or life insurance policy.


National Pension System funds deliver market beating returns

 BL Research Bureau: 

If you’ve parked your retirement savings in the National Pension System (NPS), your future appears to be in safe hands. All the five fund managers of the NPS have delivered above-average, market-beating returns across asset classes and timelines.

The NPS funds are invested in the three broad categories of equity (mainly Nifty stocks), corporate debt and government securities. In the equity portion, all the funds managed to equal or deliver 50-100 basis points more than the Nifty over one-, three- and five-year timeframes.

But it is in managing corporate debt that fund managers have done a spectacular job, what with the returns being 1.7-3.5 percentage points more than the debt mutual funds over one-, three- and five-year periods.

This performance is repeated with government securities as well, with all the fund managers managing to beat the gilt funds category convincingly.

There has been a stellar rally in equity markets over the last couple of years. With 10-year G-Sec yields softening from 9 per cent levels to 7.7 per cent, bond markets, too, have rallied. NPS fund managers certainly have managed to latch on to the rallies in both debt and equity markets.
The best fund manager

So, which fund manager is the best performer? Though there are a couple of marginal outperformers in ICICI and SBI, the other fund managers, including UTI, Kotak and Reliance, aren’t too far behind.

Barely 50-75 basis points separate the best performer and the lower-placed ones across asset categories and time-lines. For instance, over a three-year period, the returns from fund managers have been as follows — Equity: 18.4-18.9 per cent; Corporate debt: 11.4-12 per cent; G-Secs: 11.2-11.9 per cent.

ICICI has been the best fund manager across categories.

SBI, while being especially good in the G-Sec category, has also delivered well.

These two fund managers are likely to be the most preferred among the five. UTI, Kotak and Reliance have also put up a reasonable show.

How did they do it?

What has the modus operandi been? In the equity portion, most fund managers prefer to invest in stocks from the Nifty basket, though it may not exactly replicate the index in terms of weightage given to individual stocks. This active management has helped them outperform the NSE index.

In the corporate debt category, fund managers mostly choose ‘AAA’-rated securities (75-85 per cent), and make some allocations to ‘AA’ rated instruments as well. Currently, corporate debt portfolios carry a maturity profile of 8-10 years and a yield-to-maturity of 8.4-8.6 per cent.

In the G-Secs category, the preference across the board is for longer tenure debt. Typically, government securities maturing in 10-22 years are chosen, going by the fund managers’ current portfolio.

At a low cost of about 0.5 per cent and with low-risk investments, NPS fund managers have indeed given investors a lot to cheer about.


Monday, 9 March 2015

Atal Pension Yojana to replace Swavalamban Yojana from June 1

The Narendra Modi government's key social security scheme, Atal Pension Yojana (APY), will replace the previous government's Swavalamban Yojana NPS Lite, which did not find much acceptance among people.

The scheme will be launched on June 1 and focus on the unorganised sector. All subscribing workers below the age of 40 would be eligible for pension of up to Rs 5,000 per month on attainment of 60 years of age, Department of Financial Services Secretary Hasmukh Adhia told PTI in an interview

It will be a simple product open to all bank account holders, who are not members of any statutory social security scheme.

"To make the pension scheme more attractive, it has been decided that the government would co-contribute 50 per cent of a subscriber's contribution or Rs 1,000 per annum, whichever is lower to each eligible subscriber account for a period of 5 years from 2015-16 to 2019-20," he said.

The existing scheme was not getting adequate response and therefore a need was felt to revamp the scheme and make it more attractive, simple with guaranteed returns, he added.

Adhia said: "The new pension scheme with better features would replace the existing pension scheme (Swavalamban Yojana NPS Lite) which is targeted at workers of the unorganised sector".

The benefit of government's co-contribution can be availed by those who subscribe to the scheme before December 31, 2015.

Existing subscribers of Swavalamban Scheme would be automatically migrated to Atal Pension Yojana, unless they opt out, Adhia said.

Under the scheme, the subscriber would receive the fixed pension of in the range Rs 1,000-Rs 5,000 per month on attainment of 60 years, depending on contribution which would vary at the age of joining, he said.

The minimum age of joining the scheme is 18 years and maximum age is 40 years, he said. The minimum period of contribution by the subscriber under the scheme would be 20 years.


PFRDA aims to open 56 lakh Swavalamban Pension accounts through banks and NBFCs in 2014-15

Chairman of Pension Fund Regulatory Development Authority (PFRDA), Hemant G Contractor, has urged banks to propagate growth of pension schemes and set a target of opening 70 accounts per branch, amounting to a total target of 56 lacs Swavalamban accounts for the FY 2014-15. The objective is to partner with banks along with NBFCs and work as aggregators to help achieve old age income security and long-term financial inclusion.

Public Sector Banks, regional rural banks, micro-finance institutions and Non-Banking Financial Companies (NBFCs) with their vast reach and customer base have been registered as aggregators for promotion of Swavalamban scheme. Contractor said, "The Swavalamban scheme has been made an integral part of Pradhan Mantri Jan Dhan Yojana (PMJDY). Bankers should take this scheme in a mission mode and work towards achieving the targets in the stipulated time." Contractor was speaking at a conference of aggregators organized by PFRDA.

"Banks should leverage their existing branch network, customer data base, etc. in the Micro, Small and Medium Enterprises (MSME), and agriculture & rural sector to promote NPS Lite/Swavalamban. Training of Bank officials, capacity building and publicity of the scheme need also to be attended to," added B.S. Bhandari, Member (Economics), PFRDA.

Swavalamban is a government initiative in which the government co-contributes Rs. 1000/- per annum to all eligible Swavalamban pension accounts. So far, more than 35 lakhs subscriber have opened account under this scheme. Currently, only 12% of the working population is covered under formal pension system.


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