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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, 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.


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