PENSION TENSION

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Encouraged by the backing of 19 States, even as its Left allies remained stiffly opposed, the United Progressive Government on Monday declared that it would notify an interim investment pattern under the New Pension System (NPS) to facilitate parking five per cent of the funds in stock markets.

Briefing newspersons on the outcome of the "Chief Ministers' conference on pension reforms," chaired by Prime Minister Manmohan Singh here, Finance Minister P. Chidambaram said that apart from facilitating the investment of five per cent of the pension funds in the bourses, the new investment pattern would provide the option of putting the entire funds in government bonds.The investment pattern, Mr. Chidambaram stressed, would be interim till the passage of the Pension Fund Regulatory and Development Authority (PFRDA) Bill, pending in Parliament. The first fund manager would be from the public sector.

The Centre decided to move ahead even as the continuing rift between the UPA and its Left allies over the pension issue came out in the open yet again. This was clear when the Left-ruled West Bengal, Kerala and Tripura also briefed newspersons.While the Left parties are also opposed to the PFRDA Bill, the NDA-ruled States are seeking expeditious legislation. The Centre, however, is confident of bringing round its Left allies, as their support will be crucial for the passage of the Bill. "We will continue to consult the political parties..." Mr. Chidambaram said, noting that a consensus was emerging that the Bill should be passed at the earliest, though "of course, with some amendments."The interim notification would include the setting up of a Central record-keeping agency for the NPS.Addressing the conference, Dr. Singh asked the States to cooperate with the Centre in working out new investment avenues for funds under the NPS.

"The suggestion being considered is that pending a resolution of all issues related to the PFRDA Bill, these accumulated funds may be allowed to be invested in accordance with the investment pattern prescribed for non-government provident funds."Dr. Singh stressed the need for better management of pension liabilities so that State finances could be managed in a healthy, sustainable way. The rising pension bills at all levels of the government would be increasingly difficult to finance in future.The pattern, Dr Singh said, would fetch returns superior to those provided by the Government currently, without any compromise on the safety factor.""

In a sense, this follows the story that was doing the rounds about five years ago, which had vivid details of impending penury for the vast majority of those dependent on the pension amounts. This also is an unhappy fallout of the swampy mess created by the intermingling of the inability of the authorities to generate committed returns, Defined Benefit seguing into Defined Contribution and an unhealhy political atmosphere where fundamental differences do not go away after a good night's sleep.

Maybe some results to be learnt from the US experience, or we will yet need a Bull market to affect and reduce the pension coffers of those desirous of the kitty as their sole hope