Pension funds to play bigger role in infra financing: Jayant Siinha

Minister of state for finance Jayant Sinha has highlighted the role of pension funds as a source of long-term finance for infrastructure development and the need to have increased pension flows in the debt and equity markets to reduce volatility.

The minister said this while addressing a conference to promote the National Pension System (NPS) among corporates, corporate employees and private citizens in the light of the Budget announcements.

The 'Conference on National Pension System (NPS) for Corporates and Points of Presence (POPs)', organised under the theme 'NPS- Expanding Horizons - The Way Forward'.

Sinha also mentioned the need to have innovative products and services under retirement architecture, which would match the risk appetite of various types of customers.

He emphasised the need for an inclusive pension scheme to cater to every class of the society in tune with the slogan Sabka Sath Sabka Vikas and said the budget announcements like the `Atal Pension Yojana' for economically weaker section of society and tax incentives for NPS as a step in that direction.

Earlier, in his opening address, Hemant Contractor, chairman, PFRDA, said while the recent budget announcements have made life insurance, health insurance and pension affordable, he said the penetration of both pension and insurance schemes in the country is low and better coverage is required in view of the growing population of the elderly.

He said operational issues in NPS like simplification of account opening, withdrawal, grievance management etc have been improved. He said PFRDA was in the process of finalising various regulations and expressed optimism about expanding the subscriber base in view of the large potential.

Sinha said the government was focused on expanding the 'retirement market' in India, for which several initiatives have already been taken recently.

Besides stressing on the need to allow more sophisticated products in the pension market, it is also important to ensure that more pension monies flow into equity markets, he added.

Sinha said that expanding the 'retirement market' would bring India three benefits: it would protect citizens after retirement, result in flow of long-term funds into building infrastructure and help reduce volatility in the Indian stock markets.

Tax on NPS withdrawal
The minister said prospective New Pension Scheme (NPS) subscribers should not get ''bogged down'' by the fact that NPS attracts tax at the time of withdrawal on retirement. ''What is important is - are you saving enough for retirement,'' he said.

Later, PFRDA chairman Hemant Contractor told reporters that the Authority's board will take up the GN Bajpai committee report in the next two - three weeks.

The panel had, among other things, recommended that government employees subscribing to NPS be allowed to choose their own pension fund managers, which could open the doors for private fund managers to manage pension monies of central and state government employees.

PFRDA had organized the Conference with the main objective of sensitizing the distributors' community as also corporates whose role is crucial in extending the reach and coverage of NPS in the country, both for the organized and unorganized sectors in the aftermath of recent budgetary announcements including:

  • The limit on deduction on account of contribution by employee to NPS, which was capped at Rs1 lakh last year, has been removed and now the tax deduction can be claimed up to 10 per cent of salary subject to ceiling of Rs1.50 lakh
  • An additional deduction for the investment up to Rs50,000 in NPS has been introduced under sub-section 80CCD(1B). This is over and above the limit of deduction available under sec 80CCD(1). This is an exclusive tax deduction available only for investment in NPS and not available for any other investment;.
  • As a significant measure for promoting a unified pension system in the country, the government has announced in the budget, the option for employees to select either EPF or NPS.
  • For providing pension to workers employed in the unorganised sector not covered by Statutory Social Security Schemes, the ''Atal Pension Yojana'' (APY) has been announced for providing a defined benefit pension to the members, depending on their amount and period of contribution. This is expected to bring a lot of comfort to the weaker and disadvantaged section of the population who do not have a formal employment.

Currently, NPS has more than 8.7 million subscribers with total asset under management (AUM) of more than Rs80,800 crore.