5% of new pension money to be invested in stocks

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Non-government provident funds are now allowed to invest up to 5 per cent of their corpus in shares of companies with investment grade debt rating from two rating agencies, 25 per cent in central government securities, 15 per cent in state government securities, 25 per cent in bonds and securities of public financial institutions and the balance in any of these three categories.

Till date, all funds collected from new government recruits under the NPS (about Rs 1,500 crore) were deposited with the Public Account of India. This yielded a return of only 8 per cent per annum to the subscribers.

So far, 19 States have opted for NPS. Kerala, West Bengal and Tripura have expressed reservations on the NPS, stating that their employees would stand to lose from the defined contribution scheme.

Meanwhile, Mr Chidambaram made it clear that a new investment pattern would emerge for NPS with the enactment of the PFRDA Bill, which was before Parliament.

He also said that the Centre would soon notify a central record-keeping agency. Indications are that the same agency would service the accounts coming through the State governments.

Mr Chidambaram clarified to the Chief Ministers that the first fund manager to be appointed would be a public sector fund manager. He also highlighted that subscribers would be given an option to invest their entire contributions (including matching government contributions) in Government bonds.

Mr Chidambaram indicated that the combined pension bill of the Centre and the States is to top Rs 1,00,000 crore by 2009-10, if the current trend in pension payments were to continue.

Taken from Business Line

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