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Our Bureau

Ministry not for separate scheme for informal sector

GOING FORWARD: (From right) Mr D. Swarup, Chairman, PFRDA; Mr Pawan Kumar Bansal, Minister of State for Finance; and Mr N. N. Joshi, Chief Representative, ING Insurance International B. V., releasing a book in the Capital on Tuesday. - Kamal Narang

New Delhi , Dec 12

Civil servants' demands for guaranteed rate of returns under the new pension scheme (NPS) are holding back pension reforms for the majority of the workforce without any formal pension support, according to Mr D. Swarup, Chairman of the Pension Fund Regulatory and Development Authority (PFRDA).

"Reforms intended to bring formal pension support to 88 per cent of workforce (374 million) is being blocked by those who want guaranteed returns for civil servants, who constitute three per cent of the workforce," he said at a book release function organised by the ING Group, IIM- Bangalore and Tata McGraw-Hill today.

The formal pension support system covers only 12 per cent of the working population of about 425 million.

Mr Swarup's suggestion that the issues of pension to civil servants and the rest of the workforce needs to be segregated did not find favour with the Minister of State for Finance, Mr Pawan Kumar Bansal.

"I do not think it would be feasible at this stage to segregate the issues," he said.

"May be it's a way to convince those who are opposed to the Bill. I don't know whether it would work."

Mr Bansal was speaking after releasing a book titled Facing the Future: Indian Pension Systems.

The PFRDA Chairman also said that the task of passing the Pension Bill could be carried forward if the issues pertaining to civil servants are segregated and negotiations held separately.

The Pension Bill, which was introduced in Parliament 21 months ago, is yet to be passed by both Houses of Parliament.

Civil servants are keen that they get 50 per cent replacement rate on the last paid salary prior to January 1, 2004.

Mr Swarup said that it was feasible to get returns that would match with 50 per cent replacement rate, but it was not possible to guarantee such returns eternally.

Mr Swarup said though four investment options have been proposed under New Pension System (NPS), a fifth scheme ``default option'' will be made available that operates like a life cycle fund. It means investments are made keeping in mind the age and risk taking ability of the subscriber.

Under default option, the regulator will decide the investment pattern of customers who do not want to opt for any of the four investment options.

More Stories on : Social Security | Pension Plans | Human Resources

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