New Delhi, May 1 (IANS) A new voluntary pension scheme came into force in India Friday with young people as its main target, and hoped to reach out to the 87 percent of the nation's workforce that remained uncovered by any retirement benefit.
The Pension Fund Regulatory and Development Authority has extended the scheme on May Day to all citizens, after introducing it for fresh recruits of the central government since Jan 1, 2004. It has taken some 10 years of conceptualisation.
'Under the new scheme, beneficiaries can divide their investments in three categories,' said Meena Chaturvedi, executive director with the regulator, adding these can be in equity, government securities and corporate bonds and mutual funds.
'One can opt to invest only 50 percent of the funds in equity, which will be in index funds of the Bombay Stock Exchange and the National Stock Exchange. It can be 100 percent for the other two categories,' Chaturvedi told IANS.
Contributions will be made towards two accounts, one of which will be entirely for savings towards retirement, which cannot be withdrawn. The other portion will be voluntary and can be encashed whenever the beneficiary pleases.
The second portion, however, takes effect only six months of joining the scheme, for which the eligibility is 18-55 years. Those who join will be allotted a permanent retirement account number so that the account can be operated from anywhere.
The beneficiaries can exit the scheme after reaching 60. They can continue only up to the time they are 70.
According to Chaturvedi, out of 425 million estimated workforce in the country, as many as 370 million were still not covered under any pension scheme. 'Twenty years down the line, we expect majority of them will be covered,' she said.
Quoting a survey commissioned by the regulator, she said some 80 million people would be willing to join the new pension scheme, and also have the capacity to invest, over the next four-five years.
Officials at the regulatory authority said that Rs.2,100 crore (Rs.21 billion or $420 million) stood invested in the new pension scheme for central government employees, giving an annual rate of return of an impressive 12-16 percent.
Explaining the finer points of the new scheme, officials said six pension fund managers have been appointed by the regulator for the new scheme, with 22 points of reference - the institutions that beneficiaries can approach to join.
The minimum contribution is Rs.6,000 per annum. The money has to be paid in at least four instalments a year. No instalment can be of less than Rs.500. There is no upper limit on the number of instalments or the money one can put in per instalment.
'People can deposit the money any number of times. We have 285 branches now to accept deposits. We expect to come up with 3,000-4,000 more branches over the next three months,' said Chaturvedi.
'People will be easily able to open and operate their accounts. We are in touch with various banks for this, extending our coverage,' she said, adding: 'The fund is completely regulated by us. The idea is to provide security to people.'
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