BHUBANESWAR, OCT 21, 2022
As some state governments decided to revert to the old pension scheme (OPS), a senior official of the PFRDA said that the respective governments should take prudent financial decisions before re-introducing the OPS.
Speaking on the sidelines of the Annuity Literacy Programme (ALP) here, Pension Fund Regulatory and Development Authority (PFRDA) Chairman Supratim Bandyopadhyay said that state governments should think about financial viability before reverting to the old pension scheme (OPS).
Though it is up to the states to decide whether they want to continue with the National Pension System (NPS) or go back to the OPS, they should take into account their financial health as switching back to the old pension scheme from the NPS could have disastrous consequences for state finances, said Bandyopadhyay.
The NPS is a retirement scheme designed and regulated by the PFRDA that allows investors in the scheme to help build a retirement corpus. Since its launch on 1 January 2004, it has emerged as a preferred investment option for Central and State government employers, and the self-employed alike.
Though all states – except for West Bengal and Tamil Nadu – had migrated to the NPS, Rajasthan, Chhattisgarh, Jharkhand and Punjab have already reverted to the OPS and some other states are mulling over re-introducing it.
The states are going back to the old system due to huge financial burdens as in the NPS those employed by the government contribute 10 per cent of their basic salary while their employers contribute up to 14 per cent.
When asked how the decision of some states to revert to OPS would impact NPS, Bandyopadhyay said the entire contribution of the states would not go back to them. “The existing contributions will be with us though there will be no fresh contributions,” he said.
Stating that such a decision is not financially prudent, the PFRDA Chairman wondered how the OPS which was not viable 18 years back, could be feasible now.
The total asset managed under various pension schemes is Rs 34 lakh crore, he informed.
Bandyopadhyay said there are around 1.64 crore NPS subscribers and 3.62 crore Atal Pension Yojana (APY) subscribers in the country. The target has been set to achieve 1.5 crore under APY and 15 lakh under NPS in the current fiscal, he added.
As far as Odisha is concerned, there are 4.60 lakh subscribers under the NPS and their contribution to the pension fund is around Rs 25,000 crore. Similarly, 15 lakh people in the state have subscribed to APY so far and their contribution stands at Rs 1,200 crore, informed the PFRDA Chairman.
Explaining the importance of proper planning for retirement, Bandyopadhyay suggested that one should start investing in pension schemes at an early age to reap better and higher benefits. He further said that purchasing annuity pension plans is the better option to fulfill one’s post-retirement financial needs.
The penetration of National Pension Scheme and Atal Pension Yojana has improved significantly in the last 5 years, rising from 1.2 per cent in FY2016-2017 to 3.7 percent in FY2021-22.