PFRDA: Choice of Pension Funds & Investment Pattern in Tier I of NPS(SG, SABs, CABs)
PENSION FUND REGULATORY AND DEVELOPMENT AUTHORITY
CIRCULAR
PFRDA/17/08/11/0031/2017-SUP-SG
01st June 2020
Subject: Choice of Pension Funds and Investment Pattern in Tier I of NPS for the Government subscribers employed with State Governments (SG), State Autonomous Bodies (SABs) & Central Autonomous Bodies (CABs)
A. This has reference to the Gazette Notification F. No.1/3/2016-PR. dated 31-01-2019 issued by Dept. of Financial Service (DFS), Ministry of Finance (MoF), pursuant to which the Authority vide its circular no PFRDA/2019/12/REG-PF/1 dated 08th May 2019, introduced the choice of the pension fund and investment pattern in the Tier I of the NPS for the employees of the Central Government.
B. The following were introduced by Central Government through the DFS Gazette Notification ( Annexure 1) mentioned supra
I. Enhancement in Government Co- Contribution- The monthly contribution of 10 percent of the Basic Pay plus Dearness Allowance (DA) to be paid by the employee and 14 percent of the Basic Pay plus DA by the Central Government.
II.Compensation For Non-Deposit Or Delayed Deposit Of Contributions in the following cases:
1. where the NPS contributions were deducted from the salary of the Government employee but the amount was not remitted to CRA system or was remitted late;
2. where the NPS contributions were not deducted from the salary of the Government employee;
3. where the Government contributions were not remitted to CRA system or were remitted late (irrespective whether the employee contributions were deducted or not),
(Details may be seen from Annexure 1)
III. Choice of Pension Fund And Investment Pattern In Tier-I Of NPS as under:
1. Choice of Pension Fund: The Government subscriber shall be allowed to choose any one of the pension funds including Private sector pension funds. They can change their option once in ‘a year. However, the current provision of combination of Public Sector Pension Funds will be available as default option for existing as well as new Government subscriber.
2. Choice of Investment Pattern: The following options for investment choices shall be offered to Government subscribers
i) Default Scheme: The existing scheme in which funds are allocated among three Public Sector undertaking fund managers shall continue as default scheme for both existing and new subscribers.
ii) Scheme G: Employees who prefer returns with comparatively less amount of risk shall be given an option to invest 100% of the funds in Govt. securities. (Scheme G)
(iii) Auto Choice Life Cycle Funds: Employees preferring better returns with comparatively higher risk shall be given the options of the following Life Cycle based schemes
a) Conservative Life Cycle Fund with maximum exposure to equity capped at 25%- LC-25 Scheme.
b) Moderate Life Cycle Fund with maximum exposure to equity capped a 50 LC- 50 Scheme
The Government subscribers may exercise one of the above choices of Investment pattern twice in a financial year.
IV. Implementation of choices to the legacy corpus: Transfer of huge legacy corpus in respect of the Government subscribers from the existing Pension Funds is likely to impact the market. it may be practically difficult for the PFRDA to allow Government subscribers to change the Pension Funds or investment pattern in respect of the accumulated corpus, in one go. Therefore, for the present, change in the Pension Funds or investment pattern is allowed in respect of the incremental flows only.
V. Transfer of Legacy corpus in reasonable time frame: PFRDA shall draw up a scheme in due course for transfer of accumulated corpus as per new choices of Government subscribers in a reasonable time frame of say five years. Once PFRDA draws up this scheme, change in Pension Funds or investment pattern shall be allowed in respect of the accumulated corpus in accordance with that scheme.
VI. For investment option of Default scheme as per para B.III 2 (i) above, all other terms and conditions as contained in the investment guidelines issued by the Authority dated 03.06.2015 for NPS Schemes (Applicable to Scheme CG, Scheme SG, Corporate CG and NPS Lite Schemes and APY) and subsequent amendments made thereto shall be applicable.
VII. Further, for investment options as per para Bill 2 (ii) or Bill 2.(iii) (a) and (b) above, all other terms and conditions as contained in the investment guidelines issued by the Authority dated 04.05.2017 in respect of NPS Schemes {Other than Govt. Sector (CG & SG), Corporate CG, NPS Lite and APY} and subsequent amendments made thereto shall apply.
C. It has been brought to the notice of the Authority that while some of the State Governments (SGs) / SABs/ CABs have either partially or wholly adopted the provisions of Gazette Notification F. No.1 /3/2016-PR. dated 31-01-2019 issued by Dept. of Financial Service (DES), Ministry of Finance (MoE), the others have been seeking clarifications on the same. It is, therefore, clarified that the State Governments ( SGs) / SABs/ CABs are free to adopt the provisions of the said Gazette notifications on their own volition, based on their own internal approvals and notifications , without seeking the Authority’s approval.
D. This circular is issued in exercise of powers of the Authority under sub-clause (b) of sub-section (2) of Section 14 read with Section 23 of the PFRDA Act, 2013 and sub regulation (1) of Regulation 14 of the PFRDA (Pension Fund) Regulations, 2015.
Sum Kaur Kapoor
Chief General Manager
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