7th CPC... Part V

NPS...

Ø  The Commission recommends that the investment choices under NPS be calibrated on a life cycle approach and the choices be offered in a simple manner so that any lay person can understand and act accordingly. The Commission also recommends that government, in consultation with PFRDA, come up with different options for investment mix and provide subscribers a range of options.

Ø  Associations and individuals have made presentations before the Commission highlighting that forecasts suggest that a 10 percent contribution from government will not be adequate to provide reasonable post retirement financial security in all cases. The Commission, therefore, recommends that this important aspect should be re-examined in detail by an expert body for making course corrections if required.

Ø  The Commission therefore recommends that Central Governments and State Governments should, in a time bound manner, ensure that all the due contribution along with compounded interest, where contributions have been delayed, be deposited in the accounts of the beneficiaries. Advisories should be issued to the State Governments to deposit amounts, if not already done, in respect of NPS beneficiaries belonging to All India Services.

Ø  The Commission therefore recommends that PFRDA should take steps to make the Tier-II accounts operational as early as possible to enable the NPS subscribers the facility of withdrawals from their accounts in case of requirement.

Ø  The Commission noted that PFRDA sends a communication to every participant each month with the current pension wealth and the latest contribution that has been credited. The Commission recommends that focused efforts be made to capture email addresses and mobile numbers of subscribers so that seamless communication is ensured for all subscribers. The Commission recommends that consultation with stakeholders should also be held periodically in different parts of the country.

Ø  The Commission notes that no department of Government of India is taking ownership of the NPS. The Commission recommends that a Committee consisting of Secretary, Department of Financial Services, Secretary, Department of Pensions and Pensioners Welfare and Secretary, Department of Administrative Reforms and Public Grievances may be constituted to review the progress of implementation of NPS. The Commission Report of the Seventh CPC 427 Index also recommends that steps should be taken for establishment of an Ombudsman for redressing individual grievances relating to NPS

Ø  The Commission feels that tax neutrality should be ensured across various avenues for long term savings for post retirement incomes so that the employees covered by NPS are not at a disadvantage. The Commission therefore recommends that withdrawals under the NPS should be tax-exempt to place NPS at par with other pension schemes. The Commission also recommends that the service tax levied at the time of annuity purchase by NPS subscribers should be exempted.

Ø  Family Pension after the death of the employee is not ensured in the NPS. The Commission notes that the government had provisionally extended benefits under the Central Civil Service (Extraordinary Pension) Rules, Family Pension/Extraordinary Family Pension/Liberalised Pensionary Award to government servants appointed on or after 01.01.2004. Rules regulating these benefits have now been notified by the PFRDA. PFRDA regulations provide for an exit option from NPS in case of premature death of the subscriber by availing of additional relief from government, in which case the entire accumulated pension wealth inclusive of subscriber’s contribution would be transferred to government. The Commission recommends notification of a scheme by government for provision of additional relief in such cases consequent to exit from NPS.

Ø  The Commission notes that rules and regulating relating to NPS are being framed and notified by PFRDA from time to time... The Commission recommends that government encourage the PFRDA to set up a strong consultative mechanism involving the DPPW, DoPT, DFS and some associations of employees for a review of regulations and for finalizing future regulations to bring clarity and remove uncertainty relating to NPS. The Commission also recommends that draft regulations should be widely publicized to enable subscribers to respond to any proposed changes, as normally done by other regulatory authorities.