New pension plan lets you cherry pick

back

Want to support Global Action on Aging?

Click below:

Thanks!

New pension plan lets you cherry pick

TIMES NEWS

August 07, 2003

MUMBAI: Under the new pension plan to launched by December, individuals will not only get to choose the scheme, but also pick the fund manager who is offering the best possible return.

The government is yet decide the number of fund managers who will be allowed to operate, but will review the earlier proposal of restricting the number at six. Besides, the fund managers may even be allowed to invest in overseas markets.

Though the returns will have tax exemptions, the final withdrawals will be taxed. The government has however clarified that there is no proposal to allow premature withdrawals.

Speaking to the media here on Wednesday, a senior finance ministry official closely involved with formulation of the scheme said the investor can choose his fund manager as well as the scheme through the central record keeping agency (CRA) which is yet to be finalised by the government. This will ensure that the participant can continue with the scheme even in case of a job switch.

“This will will allow labour migration without affecting the scheme,” the official said.

The government proposes to introduce EET (exempt -exempt-tax) model, wherein the contribution and earnings will be tax exempt, while the final withdrawals will be taxable.

Initially this will opened to government employees and the unorganised sector and the participant will have to contribute till they reach super annuation.

A separate regulator will decide the eligibility criteria for fund managers, the number of fund managers who will be allowed to manage the schemes, the choice of the CRA, among others.

The scheme is unlikely to allow annutised income, which means that the pension fund is not likely to function as an insurance scheme, though the pension scheme will be involved in long-term fund management.

“One has to learn from the Seaman’s PF scam....the government has to ensure that such incidents are not repeated. The government is keen on pension sector reforms, though sequencing of reforms is very important,” said the official. One cannot have an administered interest rate regime and at the same time have reforms, he said.