The Union government will be tweaking some provisions in the pension reforms Bill to facilitate easier passage in Parliament. It will also alter certain norms in the current pension scheme, to make it more attractive for the poor in the unorganised sector.
The moves come in the wake of lukewarm support to the much-touted Swavalamban scheme till now. It could manage a little over 365,000 enrollments till this September as against a target of 2 million lakh subscribers, according to the finance ministry.
The scheme is a co-contributory pension scheme for the unorganised sector. Thus, the government would chip in Rs 1,000 per annum for three years for each subscriber. Now, the government plans to extend its contribution to five years for all subscribers who had joined the scheme in 2010-11 and 2011-12.
A Cabinet note is being drafted for this purpose. As part of it, the finance ministry is talking to the Pension Fund Regulatory and Development Authority, according to officials. The interim pension regulator administers the scheme.
The government is mulling allowing subscribers to exit from the scheme at the age of 50 or a minimum tenure of 20 years, whichever is later. Currently, subscribers can exit from the scheme at the age of 60. The proposals were part of the 2011-12 budget.
The Swavalamban scheme, being funded by government grants, was announced in the 2010-11 Budget. To be eligible under it, a person will have to make a minimum contribution of Rs 1,000. The maximum contribution is Rs 12,000 per annum. The contributions of subscribers under Swavalamban are collected by agencies — under the government or NGOs — in flexible instalments on monthly or quarterly basis. They are then invested in financial instruments. The returns and the contributions would be used to build a pension corpus of the subscribers.
The subscriber could be eligible to get pension from a life insurance company at 60 years of age by using 40 per cent of the pension corpus. However, if the amount of pension corpus is not sufficient to get a minimum amount of pension of Rs 1,000 per month, then the percentage of corpus would be increased so that the pension amount becomes Rs 1,000 per month. Failing this, the entire pension corpus would be used to give pension.
