Pension scheme to cover all individuals

The Pension Fund Regulatory and Development Authority is finalising its plan to incorporate individuals, who are neither employed with central nor state Govts in the new pension scheme, reports Sandeep Singh.

The Pension Fund Regulatory and Development Authority (PFRDA) is finalising its plan to incorporate individuals, who are neither employed with central or state governments, in the new pension scheme (NPS) through which they can plan and invest for retirement.

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NPS currently covers the central government and state government employees who have joined since January 1, 2004 on a mandatory basis.

“It will be opened nationwide for anyone on a low cost basis and we have fixed our final date as April 1, 2009 for implementation,” said D Swarup, chairman, PFRDA.

Before it is launched for individuals, PFRDA plans to put all systems in place and create awareness. It thus will have to create a system by which the collection of funds can happen and investments can be done.

“We are in the process of finalising the eligibility criteria for banks,” Swarup said. Both private and public sector banks will be allowed to participate and the selection process should get over by January 31.

Registered banks will act as the point of service for the NPS architecture where individuals can visit, fill the forms to become a part of the system. They will be provided with a unique identification number similar to a permanent account number and individuals can go to any member branch and deposit the money using the unique number that will route the money into the NPS network.

The minimum contribution from individuals is yet to be decided by the authority. “It has to be a viable contribution as there are costs involved,” said Swarup.

“We are also planning to offer it to a group of people in an organisation who can contribute only small amount on an individual basis.”

The new norms will be applicable on all investments made after April 1, 2009. “People don’t know what NPS is, and we will have to make them understand in layman’s language,” he said.