The Hindu 21.01.2010

New pension scheme introduced

Special Correspondent

— Photo: V. Sreenivasa Murthy

Launch: (From left) Additional Chief Secretary and Principal Secretary, Finance, M.R. Sreenivasa Murthy, Chief Secretary S.V. Ranganath, Chief Minister B.S. Yeddyurappa, and CEO of NPS Trust N.R. Rayalu at the signing of the agreements in Bangalore on Wednesday.

Bangalore: The State Government has introduced a Defined Contribution Pension Scheme (new pension scheme), applicable to its employees who have joined service from April 1, 2006. It entered into two agreements on Wednesday with the New Pension System Trust (NPST) and National Securities Depository Ltd. (NSDL).

Karnataka is the 14th State in the country to join the NPS Trust and 60,000 employees will be covered under the new scheme. As many as 15,000 to 20,000 employees are expected to join the scheme every year. The scheme is likely to be operational next month.

The agreements were signed by M.R. Sreenivasa Murthy, Additional Chief Secretary and Principal Secretary, Department of Finance, and Gagan Rai for the NSDL and N.R. Rayulu CEO of the NPS Trust, in the presence of Chief Minister B.S. Yeddyurappa.

Mr. Yeddyurappa expressed confidence that employees would immensely benefit from it. The monthly contribution under the NPS should be 10 per cent of basic pay and Dearness Allowance paid by the employees and matched by the State Government in equal proportion.

How it works

A note said government employees under the NPS should normally exit the scheme at the age of superannuation. At exit, the employee should mandatorily invest 40 per cent of pension to purchase an annuity.

The annuity will provide for pension during the lifetime of the employee and his dependent parents and his/her spouse and minor children from the time of superannuation. The remaining 60 per cent of the pension will be paid to the employee at the time superannuation. The Government has adopted the NPS architecture set and regulated by the Pension Fund Regulatory and Development Authority (PFRDA). The supervision of the scheme’s functioning and performance of all intermediates will be done by the NPS Trust under the overall guidance and supervision of the PFRDA.

Mr. Rayulu, Managing Trustee and CEO of the NPS Trust, said that so far 23 States had agreed to join the scheme and another 13 states had brought their employees under its ambit.

Funds

So far more than 6.5 lakh employees of the Union and State governments and Union Territories had joined the scheme.

Mr. Rayulu said that the trust has an operating fund worth over Rs. 3,750 crore. In a couple of months the total strength of the members would reach one million. He said that the NSDL has been appointed as the Central Record Keeping Agency (CRA) and would update the entire records of the NPS, including the contributions, investments, balances and annuity for each employee.