pfrda: Poll-bound Chhattisgarh’s plan to switch to old pension scheme hits PFRDA hurdle

After Rajasthan, Chhattisgarh government’s plan to switch from the contributory National Pension system (NPS) to the old pension scheme (OPS) has run into rough weather as the Pension Fund Regulatory and Development Authority (PFRDA) has rejected the state’s request to withdraw its contribution of over Rs 17,000 crore deposited since November 2004.

PFRDA has rejected the Congress government’s demand to withdraw funds accrued through government and employees’ contribution saying there is no provision in PFRDA Act 2013 and PFRDA Resolution 2015 and subsequent amendments to return the amount invested. Election-bound Chhattisgarh had to shift to the Old Pension Scheme from May and had notified the system in its gazette. Chhattisgarh chief minister Bhupesh Baghel has now written to Prime Minister Narendra MOdi and finance minister NIrmala Sitharaman requesting them to step in and direct PFRDA to release Rs 17,240 crore, which is the state’s and its employees contribution under the National Pension System. Baghel has written that with this amount Chhattisgarh would be able to implement the old pension system, as promised by him in Budget 2022 and then approved by the Cabinet on May 1. According to the data available with the state government, a total of Rs 11,850 crore (employee and employer contribution) has been transferred from November 1, 2004 till March 31, 2022. Baghel has written that the market value of this deposit is about Rs 17,240 crore.

Under the Old Pension Scheme, the government gives 50% of the salary of an employee as pension at the time of retirement. Since this system puts a financial burden on the Exchequer, the Centre had introduced the contributory NPS. Under NPS 10% is deducted from the salary and an equal percentage is contributed by the employer. The contributions are invested in bonds and securities. If an employee takes voluntary retirement scheme, she can withdraw 20% of the amount accrued but reinvest 80% and if the employee retires, she can withdraw 60% but has to reinvest 40%.

The Congress-led governments in Chhattisgarh and Rajasthan had announced the move with an eye on the Assembly elections next year to tap into the substantial government employees vote. However, with PFRDA rejecting the withdrawal of the funds the governments are in a bind. Chhattisgarh had planned to use this money and keep it under general provident fund (GPF), which will allow government employees to access it at the time of retirement.

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