NEW DELHI: Pension regulator PFRDA has rejected demands made by Rajasthan, Chhattisgarh and Jharkhand to return funds deposited under the National Pension System (NPS), which were abandoned by them to bring back the old pension scheme (OPS) to their respective states.
The three opposition-governed states have vowed to return to the OPS, which offers 50% of the last pay drawn to government employees, instead of the NPS, where 10% of the salary is contributed by employees and a matching contribution is made by the employer. The money is then given to the designated fund managers. On retirement, the corpus is returned to the employee with the funds to be used to buy annuity covers.
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Replying to a question from BJP’s Sushil Modi in the Rajya Sabha, junior finance minister Bhagwat Karad said the Pension Fund Regulatory and Development Authority (PFRDA) has informed that there is no legal provision for a refund of NPS contributions.
Finance minister Nirmala Sitharaman had earlier rejected the demand for refunds. The decision will also have a bearing on Himachal Pradesh, where the recently elected Congress government has promised a return to OPS.
In the absence of a refund, the three states will have to either provide the fund for the last 16-17 years or stay with the existing mechanism, which was extended to the states from 2005 when the Manmohan Singh government was in office.
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During the Atal Bihari Vajpayee government’s tenure, the Centre had introduced NPS for all new recruits from 2004. When the UPA was in government, then finance minister P Chidambaram had announced its extension to all states, some of which were initially reluctant to join. The government said that there are 21 lakh subscribers from the Centre, with contributions of a little under Rs 1.5 lakh crore. The assets under management (AUM) under NPS are estimated at over Rs 2 lakh crore.
The 32 states and Union territories have over 50 lakh subscribers with contributions of almost Rs 2.7 lakh crore and the AUM is pegged at over Rs 3.6 lakh crore.
