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15% pension for stocks okayed
Tribune News Service

New Delhi, November 27
Pension Fund Regulatory and Development Authority (PFRDA) has cleared the decks for investing up to 15 per cent of the retirement money of new central and state government employees in stock markets, by appointing SBI, UTI Mutual Fund and LIC as fund managers. “We have signed an agreement with National Securities Depository Ltd (NSDL), appointing it as central recordkeeping agency (CRA) for the new pension scheme (NPS) for all Central government employees recruited since January 1, 2004,” PFRDA chairman D Swarup said today. All the 19 states, which agreed for the interim arrangement, are also expected to join the NPS shortly, he said, adding that the fund managers would also offer an option to employees to invest 100 per cent of their pension funds in government securities with assured returns. Only the three Left-ruled states of West Bengal, Kerala and Tripura have declined to join the NPS.

At the initial stages, there shall be two investment options available under the NPS. The subscribers shall have the option of having their pension contributions either invested fully in government bonds and securities or in accordance with the investment guidelines for non-government provident funds, issued by the Centre on January 24, 2005 that allows investment of funds up to 5 per cent into equity and another 10 per cent in equity-linked mutual funds.

Around 1,00,000 employees would join the scheme annually and the pension fund would grow by about Rs 1,000 crore a year, Swarup said.

Under the NPS, the government and employees contribute 10 per cent each of the employee's monthly salary in the pension fund. The government is expected to transfer the funds to fund managers by June 2008 and the system would be operational, he said.

While the LIC has already incorporated their pension fund, SBI and UTIAMC are expected to complete the process by December 15. Once the NPS architecture becomes fully operational, the NPS corpus of Central government employees will be distributed amongst the three pension funds based on the initial investment management fee and transaction based charges quoted by these entities.

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