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New
Delhi: The committee
on pension funds and pension fund reforms has advised the government
that it should review the existing arrangement of contributing pension
from its own corpus and instead recover the same from its employees.
The advice is based on the fact that pension liabilities have become
the largest growing entity of
its expenditure portfolio and therefore need to be reduced.
The governments
expenditure on pensions is expected to be of the order of Rs 22,000
crore in the current fiscal, with all of it coming from out of the
governments own corpus and none through contributions from the
employees.
According to the advice of
the committee, the government will, in future, recover 10 per cent of
the salary as employees contribution towards pension and will also
contribute an equal amount to employees pension fund. The
contribution made by the employee will also get income tax benefit
under Section 88 of the Income Tax Act.
The committee has also
advised the government that the funds so generated and saved would not
be invested in equity markets. As much as 90 per cent of the savings
would be put into government bonds. Two reasons have been cited for
the advice:
- To safeguard the
contributions made by the employees from the volatility of stock
markets
- To keep the pension scheme
out of the purview of any
pension regulator.
Instead, a board of trustees
will be set up, which include government nominees and independent
experts. The committee, headed by B K Bhattacharya, is expected to
submit its report to the government by the end of this month.
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