New Delhi: Prime Minister Manmohan Singh on Monday pushed for pension reform and urged chief ministers to allow a part of the funds to be parked in shares to expand social security net and ensure healthy state finances.
"It is my belief that there is a lot to be gained by moving forward and allowing a multiplicity of pension products delivered by variety of agencies to people," the Prime Minister told a chief ministers' conference on pension reforms.
He said a suggestion being considered is to allow a part of the funds to be put into areas as prescribed for non-government provident funds, pending resolution of issues related to the Pension Fund Regulatory and Development Authority Bill.
"The pattern permitted has been circulated and will fetch a return superior to that given by the government at present without compromising the safety factor," he said, adding the returns amounted to just eight per cent under existing schemes.
The new system calls for investing five per cent of the corpus in shares, 25 per cent in Central Government securities, 15 per cent in state government securities and 25 per cent in bonds.
The Left parties, which support the United Progressive Alliance (UPA) Government, are opposed to pension reforms. As a result the Employees Provident Fund Organisation has not adopted the new guidelines.
Besides the chief ministers of a number of states, the conference was attended by, among others, External Affairs Minister Pranab Mukherjee, Defence Minister A K Antony, Home Minister Shivraj Patil and Finance Minister P Chidambaram.
Singh said 11 per cent of India's workforce was covered under some form of pension schemes and that, even within the organized sector, the coverage was accounted for largely by government employees.
"Therefore, workers in the unorganised sector, constituting 90 per cent of the workforce, need a comprehensive pension system which they can subscribe to," the Prime Minister said.
"We need better management of our pension liabilities so that state finances can be managed in a healthy and sustainable way in future. This is a very important basis for the changes in the pension system," he added.
Earlier, the Finance Minister said that the Central Government's expenditure on pension had gone up from Rs 32 billion in 1990-91 to Rs 289 billion last fiscal, and jumped from 7.6 per cent to 10.5 percent as a percentage of tax revenue to total pension outgo.
"Yet, a unique advantage India enjoys today is it has a relatively young working population. Around 220 million persons employed are below 40 years of age," the Finance Minister said.
"Thus, a large majority of India's workforce, that is in the age group of 20-40 years, has the opportunity and the capacity to save for their retirement. The moment must be seized," he added.
Chidambaram said he appreciated the fact that 17 state governments had decided to introduce a new contribution pension system for new employees and some others were taking pro-active steps towards the same.
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