Govt notifies hike in its NPS contribution to 14%

Perhaps kicking off the provision of sops in the budget, the central government has notified the increase in its contribution to central government employees NPS accounts from 10% to 14% with effect from April 1, 2019. The notification was issued on 31.1.2019.As per the notification, “The monthly contribution would be 10 percent of the Basic Pay plus Dearness Allowance (DA) to be paid by the employee and 14 percent of the Basic Pay plus DA by the Central Government”. Greater freedom in choosing pension funds and pattern of investment to central government employees has also been notified .Choice of pension fund and investment pattern in tier-i of NPS has been notified as under: Choice of Pension Fund: As in the case of subscribers in the private sector, the Government subscribers may also be allowed to choose any one of the pension funds including Private sector pension funds. They could change their option once in a year. However, the current provision of combination of the Public-Sector Pension Funds will be available as the default option for both existing as well as new Government subscribers.Choice of Investment pattern: The following options for investment choices may be offered toGovernment employees: -(a) The existing scheme in which funds are allocated by the PFRDA among the three Public Sector Undertaking fund managers based on their past performance in accordance with the guidelines of PFRDA for Government employees may continue as default scheme for both existing and new subscribers.(b) Government employees who prefer a fixed return with minimum amount of risk may be given an option to invest 100% of the funds in Government securities (Scheme G).(c) Government employees who prefer higher returns may be given the options of the following two Life Cycle based schemes.(A) Conservative Life Cycle Fund with maximum exposure to equity capped at 25% - LC-25.(B) Moderate Life Cycle Fund with maximum exposure to equity capped at 50% - LC-50.(viii) Implementation of choices to the legacy corpus: Transfer of a huge legacy corpus of more than Rs. 1 lakh crore in respect of the Government sector subscribers from the existing Pension Fund Managers is likely to impact the market. It may be practically difficult for the PFRDA to allow Government subscribers to change the Pension Funds or investment pattern in respect of the accumulated corpus, in one go. Therefore, for the present, change in the Pension Funds or investment pattern may be allowed in respect of incremental flows only.(ix) Transfer of legacy corpus in a reasonable time frame: PFRDA may draw up a scheme for transfer of accumulated corpus as per new choices of Government subscribers in a reasonable time frame of say five years. Once PFRDA draws up this scheme, change in the Pension Funds or investment pattern may be allowed in respect of the accumulated corpus in accordance with that scheme.

from Economic Times http://bit.ly/2HEG5po