Investing in the new pension scheme (NPS) could become doubly profitable for unorganised sector workers.
After the central government, states are coming forward to contribute Rs 1,000 a year to each NPS account. Haryana and Karnataka have already started contributing. Sources say some more states are planning follow these two. This will take the total government contribution per account to Rs 2,000 a year.
The Pension Fund Regulatory Development Authority (PFRDA) is finalising the modalities of the scheme, which will benefit about 1 million NPS subscribers in the unorganised sector. Non-government organisations and self-help groups have come forward to join the scheme. But, PFRDA is cautious about including people in the scheme.
“Haryana and Karnataka are saying they will contribute Rs 1,000. The scheme will be available for four years as we understand from the Budget speech… Many groups want to know how they can do it. We want established entities to come forward,” said PFRDA Executive Director Rani Nair. She said contributions to the withdrawable Tier-II account of NPS would not be eligible for the contribution.
To encourage people from the unorganised sector to save and to lower the cost of operation for them, Finance Minister Pranab Mukherjee said in his Budget speech that the government would contribute Rs 1,000 per year to each NPS account opened in 2010-11 and the scheme would be open for another three years.
Mukherjee made an allocation of Rs 100 crore for the scheme in 2010-11 and urged state governments to contribute a similar amount and provide social security to the vulnerable sections of the society. The scheme, Swavalamban, will be available for those who join NPS with a minimum contribution of Rs 1,000 and a maximum contribution of Rs 12,000 per annum during financial year 2010-11.
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The low-cost account of NPS will be operational from April 1 and PFRDA expects Swavalamban to help the new subscribers. An investment of Rs 3,000 a year (Rs 1,000 each from the Centre, the state government and the subscriber) will take the total invested corpus to Rs 90,000 after 30 years.
The number of NPS subscribers has touched 7,85,000, taking the corpus to Rs 4,158 crore. The number of non-government subscribers, which joined the scheme after May 1 last year, has reached 4,100. PFRDA has added 20 more points of presence in the two latest rounds, taking the total to 41.