New Pension Scheme an urgent necessity: FM

New Delhi, Jan 22: Finance Minister P Chidambaram today called for the much-needed reforms in the pension sector in form of the New Pension Scheme considering the rising fiscal stress of payments on the Central and state revenues, which if combined can reach as high as Rs 1,00,101 crore by 2009-10.

''The reforms process in the pension sector involving the setting up of New Pension System (NPS) is an urgent necessity mainly on account of burgeoning fiscal stress of pension payments on the Central and state revenues,'' Mr Chidambaram said while addressing the Chief Ministers' Conference on Pension Reforms.

''We have to evolve a consensus on how the accumulated funds would be invested and managed. It is necessary to adopt an interim model for investment of the accumulated subscriptions at both Central and state levels,'' he added.

The conference was held here to garner the support of Left parties for the Pension Fund Regulatory and Development Authority Bill (PFRDA) proposing investment of pension funds in stock markets.

The system (NPS) alone will provide a measure of security to millions of unorganised workers who do not have means to save for their retirement, he said.

The minister proposed that the investment guildelines applicable to non-government provident funds be adopted as the interim model.

He said the government's expenditure on pension could reach Rs 35,020 crore by 2009-10 from Rs 28,963 crore in 2005-06.

The state government's expenditure for the same is projected at as high as Rs 65,081 crore during the same period from Rs 41,660 crore in 2005-06.

While most of the developed nations in the world are struggling to keep their pension systems afloat, India has a unique advantage of relatively young working population, Mr Chidambaram said. ''The demographic advantage that the country enjoys will weaken over the next 15 years and will be lost when the size of the dependent population exceeds the size of the working age population.'' ''We have the opportunity to create a pension system that will accumulate the savings of the working population in order to build up sufficient financial wealth to provide a reasonable income, in form of pension, during their years of retirement. The moment must be seized,'' the finance minister added.

Highlighting that the PFRDA has already done preparatory work towards an architecture for administering the NPS, the minister said it may not be economically viable for individual states to establish seperate regulators, record keeping agencies and pension fund managers as there would be no economies of scale.

''In the interest of a harmonised system, it is necessary and desirable that the functions of regulation, record keeping accountng and management of funds are done in accordance with national guidelines,'' Mr Chidambaram said.

UNI