February 22, 2002
‘17-b’
HIGH LEVEL EXPERT GROUP RECOMMENDS REGULATORY AUTHORITY FOR PENSION
THREE PENSION FUNDS SUGGESTED
A High Level Expert Group on Pension which submitted its report to the Government today, has recommended setting up of an independent Development and Regulatory Authority to address the limitations of the current rather fragmented pension system. The Report also recommends setting up of three distinct pension funds for the Defence Forces, the Railways and the other civil services.
The Chairman of the High Level Expert Group, Shri B.K. Bhattacharya, former Chief Secretary, Government of Karnataka, submitted the report on ‘New Pension System’, to the Minister of State for Public Grievances and Pension, Smt. Vasundhara Raje, here today. The Report of the Expert Group examines the existing pension system and the expenditure trends in pension. Current expenditure on pensions has made a quantum jump after the implementation of the Fifth Central Pay Commission’s recommendations. Reviewing international experience, the Report examines the pension situation in India and recommended designing a new pension scheme.
The proposed pension scheme comprises two tiers. The first tier is mandatory and the second tier, which is optional, seeks to promote savings during one’s career with the expectation of earning additional income during one’s old age. The Group has recommended investment of pension funds in a way so as to ensure better returns, while keeping safety of the Fund in focus. The Group has also highlighted the existing data gaps and the consequent need to address this inadequacy.
The Expert Group, in the course of its deliberations came to the conclusion that no single scheme or design structure could be replicated in toto in the Indian context. What has been suggested in the Report, therefore, is technically a hybrid scheme which combines contributions from employees and the Union Government. The Report recommends actuarial valuation once in two years of the Pension Fund and effecting parametric changes.
The Expert Group was constituted on 25 June 2001 by the Ministry of Personnel, Public Grievances and Pensions to review the existing scheme and indicate the roadmap for putting in place a new system of pension based on defined contributions. The other Members of the Group included Shri H.O. Soing, Member, Insurance Regulatory and Development Authority; Shri Arvind Virmani, Advisor, Planning Commission; Shri Urjit Patel, Ex-Consultant, Ministry of Finance; Shri B.P. Mishra, Additional Secretary (Expenditure); and Dr. V.K. Agnihotri as Member Secretary.