Chidambaram in Mumbai on Friday. (Reuters)
Mumbai, Aug. 29: The Centre has asked the pension fund regulator to devise a scheme that will allow citizens to funnel a part of their retirement funds into the stock market to maximise their returns.
Finance minister P. Chidambaram told reporters here today that the scheme would mirror the one prepared under the New Pension System (NPS), which is currently meant for civil servants who joined service after January 1, 2004.
Chidambaram, who was here to inaugurate the central record-keeping agency (CRA) for the NPS, said Bengal, Kerala and Tripura were the only states that had decided not to join the scheme.
Gagan Rai, managing director and CEO of National Securities Depository Ltd, said five state governments had already signed agreements with the depositorys record-keeping agency.
As soon as we are given permission, we will open the new pension system to private citizens as well, Rai said. Under the NPS, each government employee will open an account with the CRA which will be identified through a unique permanent retirement account number.
In this system, deductions will be made from an employees salary on a monthly basis and the government will contribute an equal amount.
The amount will be invested through pension fund managers appointed by the Pension Fund Regulatory and Development Authority.
The accumulated amount will be reflected in the employees account while they are working. On retirement, they will be able to use the corpus to procure a pension for the rest of their lives.
Chidambaram said less than 15 per cent of the 425-million workforce has access to pension.
Chidambaram said the government was looking to engage a strategic investor in UTI Mutual Fund.
Emerging from a meeting with the top brass of the mutual fund, he said the induction of the strategic investor would not dilute the majority stake held by state-run institutions such as the State Bank of India, Punjab National Bank, the Bank of Baroda and the Life Insurance Corporation.