Chennai, Feb 26 (Calcutta Tube) Encouraging people to save in the New Pension Scheme, Finance Minister Pranab Mukerjee Friday said the central government will allocate Rs.100 crore to the scheme in the next fiscal.
‘To encourage the people from the unorganised sector to voluntarily save for their retirement and to lower the cost of operations of the New Pension Scheme (NPS) for such subscribers, government will contribute Rs.1,000 per year to each NPS account opened in the year 2010-11,’ he said in his budget speech.
He said the incentive will be available for people who join NPS with a minimum contribution of Rs.1,000 and a maximum contribution of Rs.12,000 per annum during the next financial year.
‘The scheme will be available for another three years. Accordingly, I am making an allocation of Rs.100 crore for the year 2010-11. It will benefit about 10 lakh NPS subscribers of the unorganised sector. The scheme will be managed by the interim Pension Fund Regulatory and Development Authority,’ he said.
He also appealed to the state governments to contribute similar amount to the scheme and participate in providing social security to vulnerable sections of the society.
Introduced in May last year, contributions under the scheme can be made towards two accounts, one of which will be entirely for savings towards retirement, which cannot be withdrawn. The other portion will be voluntary and can be encashed whenever the beneficiary pleases.
The minimum contribution is Rs.6,000 per annum. The money has to be paid in at least four instalments a year. No instalment can be of less than Rs.500. There is no upper limit on the number of instalments or the money one can put in per instalment.
Pension Fund Regulatory and Development Authority (PFRDA) chairman G.C. Chaturvedi told IANS that the target of increasing the number of investors from 4,000 currently to 10 lakh is achievable.
‘The target set under the New Pension Scheme to increase the subscribers from 4,000 to 10 lakh in next three years is achieveable,’ he said.
‘We will be approaching various associations representing interests of workers in unorganised sectors like the bodies of diary and fishery farmers.’
However, industry expert and Malhotra Committee on Insurance Reforms member R. Ramakrishnan said that any pension scheme should have a minimum guarantee and the NPS does not offer any such incentive.
‘Under the new pension scheme, there is neither an agent nor a guarantee. If the government is going to make a contribution of Rs.1, 000 per month for three years, it may have some impact,’ Ramakrishnan told IANS.