All citizens of the country will be able to avail of pension facility from Friday, with the interim pension regulator PFRDA confirming the scheduled launch of the mega pension plan in a statement on Thursday.
"The necessary infrastructure for the rollout of New Pension System (NPS) is now ready and it will be available to all citizens of India from May 1, 2009," Pension Fund
Regulatory and Development Authority (PFRDA) said. Tier-I of NPS constituting non-withdrawable pension account will become operational from tomorrow and Tier-II (withdrawable account) of the NPS account will become operational in about six months.
Pension fund managers will manage three separate schemes, each investing in a different asset class. These asset classes are equity, government securities and credit risk-bearing fixed income instruments.
"On the basis of recommendations of the NPS Trust and on advice from the government, it has been decided that investment by an NPS participant in equity would be subject to a cap of 50 per cent," it said.
The authority has appointed 22 points of presence (PoPs) and six pension fund managers. Branches of the registered PoPs, to be called PoP service providers, will be the contact and collection point for all citizens other than government employees wanting to obtain a Permanent Retirement Account Number (PRAN).
The investment will only be in index funds that replicate either BSE sensitive index or NSE Nifty 50 index. The subscriber will have the option to actively decide as to how the investment will be in the three asset classes.
In the event of the subscriber being unable or unwilling to decide, his contribution will be invested according to the 'auto choice' option, which is based on a predefined portfolio varying with the age of the subscriber.
The NPS architecture has been operational for central government employees for over a year now - since April 1, 2008, and the NPS corpus amounting to over Rs 2,100 crore (Rs 21 billion) stands invested in it.
"The three pension funds have generated returns varying from 12 per cent to 16 per cent on the NPS corpus during the year 2008-09, weighted average return being over 14.5 per cent," PFRDA said citing unaudited results.
The states are at different stages of adopting NPS. In August 2008, the government advised PFRDA to extend NPS, currently subscribed to by government employees, to all citizens on a voluntary basis.
Central government employees, who joined service on or after January 1, 2004, are covered under NPS. Unlike the old pension scheme, in NPS both employees and the employer (in this case, government) contributed an equal amount to the pension fund. Twenty-one states have also joined the scheme.
However, NPS for all citizens will not have any mandatory obligation for employers to give matching contributions to the pension fund.
The six fund managers for the new scheme are SBI, UTI Asset Management, ICICI Prudential Life Insurance, Reliance MF, IDFC Mutual Fund and Kotak Mahindra.
