PFRDA source says 3 states exited pension plan but still contributing
Informist, Tuesday, May 30, 2023
--PFRDA source says 5 states notified exiting National Pension System
--PFRDA source: 3 states that exited pension plan still contributing
--Rajasthan halted national pension plan payment mid-FY23
--Jharkhand halted national pension plan contribution Apr
--States' total natl pension plan AUM 4.75 trln rupees
By Priyasmita Dutta, Priyansh Verma, and Sagar Sen
NEW DELHI - Five states have issued a notification to pull out of the National Pension System, though three of them--Punjab, Chhattisgarh, and Himachal Pradesh--continue to contribute to the scheme irrespective of the on-paper withdrawal, an official in the Pension Fund Regulatory and Development Authority said.
"The contribution from these three states to the National Pension System has come for the month of April," the official told Informist.
Rajasthan had discontinued contribution in mid-2022-23 (Apr-Mar) and Jharkhand stopped paying from Apr 1, the official said.
The government had introduced the defined-contribution National Pension System from Jan 1, 2004, replacing the defined benefit pension scheme. All states, except Tamil Nadu and West Bengal, had joined the new plan.
Under the Old Pension Scheme, government employees who have completed at least 10 years of service receive a monthly guaranteed pension based on their last drawn basic salary and the years of service. In this, the employees do not need to make a contribution. The National Pension System is a market-linked annuity scheme where an individual can invest a regular amount during employment and receive an annuity when they retire.
Under the National Pension System, the state government employees make a monthly contribution at the rate of 14% of their salary to the pension fund, and a matching contribution is paid by the state government.
The system is being administered and regulated by Pension Fund Regulatory and Development Authority. The pension system is mandatory for central government employees, while others can join it voluntarily.
The total contribution by the five states that have announced withdrawal from the National Pension System was 1.04 trln rupees as on May 27, according to official data. Himachal Pradesh has contributed 110 bln rupees, Chhattisgarh 190 bln rupees, Punjab 220 bln rupees, Rajasthan 400 bln rupees and Jharkhand 120 bln rupees to the scheme as on May 27.
The National Pension System's total corpus from all the states and union territories was at 4.75 trln rupees as on May 27.
With many states announcing their intention to withdraw from the National Pension System, the Centre has set up a committee under Finance Secretary T.V. Somanathan to review the system. The committee will study whether changes are required in the framework and suggest ways to improve pension benefits. End