Saturday, May 30, 2015

New Pension Scheme!

Few days back I have posted an article about Contributory P.F scheme and Pension Fund.
Some comrades asked me why not you write about NPS scheme?
When you join the scheme through your Bank, you might be provided with details of the scheme.  Also there is a detailed FAQ in Pension portal website.
I give below the link for reference and understanding.
As per my calculation if an employee (clerk) on joining the Bank  contribute 3370(1685+1685) per month the return at the rate of  8% is 76.84 lacs ( By recurring deposit calculation method)
This monthly subscription will vary every 3 month due to increase in D.A, by every year  as he will be getting one increment per year, and by every 5 year as there will be a wage revision. Therefore the total return will be much much higher.
Therefore benefit wise it is not a bad scheme.
Then why we oppose this scheme?

We have doubts about
Whether the funds will be stable and steady?
(i.e. whether our funds will be safe?)
Whether it will give minimum return of 8% ?
Now Central Govt., and State Govt., employees are fighting for reversal of this scheme and demand for converting  all employees to old Pension Scheme.
In my view it is a distance possibility. From 2004 lack of employees were recruited in Central, State Govt., and in PSBs.
Fund collected from these employees were deposited with Fund Managers, and in turn it has been invested in different instruments like Equity ,Debentures, and Govt., Bonds.
Taking out all these investments at a time and re-credit to respective departments and in turn crediting the individual employees is not possible. Moreover It is a policy decision taken by the Govt., Both Congress and B.J.P support this in one voice.

Then What will be the remedy?
My suggestion is to demand the Govt., to give Guarantee for our Principle amount and for a minimum return say 8%.
Asking for total reversal to old Pension Scheme may not yield desired result.
Govt., at one stage on pressure from opposition parties come forward to give guarantee for minimum return %,
In the meantime Govt., changed.
If we take the struggle towards this direction the Newly joined Comrades will be benefitted
The above is my view. You may not accept it. I didn’t expect that anyway. Opinion always differs.
Comrades may come forward to express their views.
I found an article in net describing the details of the scheme and returns and interest rate at the time retirement.
I reproduced it here. Note that whatever said is authors view only.

NPS ( New Pension Scheme )  is applicable from 2004 for Government Employees and majority of the State Governments have implemented the same.   However our Leaders dragged it till 2010, and from then on it is applicable for all  Public Sector Bank Employees recruited after 2010.
Now let’s see what NPS is all about to start with there are 7 fund managers to manage our NPS funds.
1.       HDFC Pension Management Company Ltd.
2.       ICICI Pension Fund Management Company Ltd.
3.       Kotak Mahindra Pension Fund Ltd.
4.       LIC Pension Fund Ltd.
5.       Reliance Capital Pension Fund Ltd.
6.       SBI Pension Funds Pvt Ltd.
7.       UTI Retirement Solutions Ltd.
Tier I :  This is the compulsory contribution from each individual and also the matching grant from employer ( In case of Bank Employees the contribution towards NPS is 10% of Basic and DA and an equal contribution from Management )
Tier II : Its purely voluntary in nature. You have option to invest over and above compulsory contribution.
Further, Each Tier has 3 different Assets to be invested in
E:  EQUITY  ( Max 50% of available funds )
C: Corporate Bonds
G: Government Securities
And each Subscriber can choose Fund Manager and also the asset class ( Active Choice )to be invested in. But fortunately or unfortunately this option is not yet provided to members. Only Auto Choice is provided.
Auto Choice for different employees is as follows
For Central Government  Employees:  Funds collected from subscribers are allotted to three Public Sector Pension Fund Managers i.e  SBI, UTI and LIC.
For Corporate Employees ( Including Public Sector Bank’s) : Government has given a choice to the  banks to decide investment choice either at subscriber Level or at the Bank level on behalf of all the employees.  Even the allocating the funds amongst the three asset classes can be decided by the bank.
Now here is the catch, nobody so far bothered to know where the funds are invested, which fund house is managing them, in which asset class they are invested in  and which fund house has given the best return.
We should admit that we as bankers are poor in managing our own personal finance, but this NPS invest has to be taken seriously.
Let’s analyze the maturity value at different ROI.   Assuming that contribution of Rs.3000/- ( And another 3000/- contribution by the bank* this amount may be for a officer at the initial stage ) is made towards NPS the following are the different scenarios
Amount In Lacs
Remaining years of Service ( Contribution to be Made )
25 Years
30 Years
35 Years
As you can see a 2% increase on investment is more than  one Crore for a 25-year old employee.  Further,  the longer you work in the bank the more fund you can accumulate.  This is called the power of compounding.
The detailed performance of each fund house is as follows
Summary of performance Since Inception

Majority of the funds are managed by SBI Pension Fund and Majority of the contributions are parked in Government Securities.   We can simply assume that safety is the first priority.
Just analyze your NPS statement and compare your returns with other fund managers.   If your fund is under performing put pressure on your bank to change the fund manager or demand for Active Choice instead of Auto Choice.
Unions and associations have to play a Major Role in this.  Educate the Young Lot.   Just one bad decision can make their  fund shrink from  3.77 cr to 1.36 cr.
NPS is the one of your prime investment take care of it.  Spend some time to discuss and take wise decisions.

Just one bad decision by bank employees by not opting for Pension has cost us one Bipartite.  All the Best.
courtesy: Bank news views


Anonymous said...

In SBI, bank is contributing both in PF fund and NPS for those staffs who joined the bank from 2010 it possible for any employer to contribute in both funds as in central govt the pf fund is withdrawn after introduction of NPS.can anybody explain...plz...

Anonymous said...

your views are totally relevant hari

Nilamani Sahoo said...

Sir its all about investment. Will u please explain the return in details ?

Anonymous said...

Do your own research, talk yo peers. Never trust union and leaders. It is these same fools misuided from pension option and made the employees bleed.

Anonymous said...

In settlement clerks were given low preference . for example what is the increase in medical aid ; its comparatively low with officers I.e.3000 . it makes the employees differential.

Anonymous said...

Sir did youth r selecting wrong choice as clerk in banks except in sbi because they extra allowances . v c salary increase in 10th settlement very low increase . after 5 r6 years service v cant go out r remain as our age limit exceeds for other jobs

Anonymous said...

Sir can u comment on allowance for cashier u is very risky in doing cash . he may get any amount short. Whats his fate