Cabinet to mull introduction of Swavalamban scheme in NPS

The Cabinet on Thursday will consider the finance ministers proposal of introducing the Swavalamban scheme under the New Pension Scheme (NPS) a move that is widely expected to prop up the limping national retirement scheme launched by the government on May Day last year.

Swavalamban is a co-contribution scheme announced by finance minister Pranab Mukherjee in his budget speech this year. It proposes to contribute Rs 1,000 per year for investors who join NPS during the financial year 2010-11 and invest between Rs 1,000 and Rs 12,000 per annum. This initiative will be open for three years. Therefore,NPS subscribers who open an account between April 2010 and March 2011 will accrue Rs 3,000 from the government in their retirement kitty. While an allocation of Rs 100 crore has been made for this initiative in this year’s budget,the scheme,on the whole,is likely to incur an expenditure of Rs 1,100 crore during the next four years.

The government will contribute Rs 1,000 per year to each NPS account opened in the year 2010-11. This initiative,Swavalamban,will be available for persons who join NPS,with a minimum contribution of Rs 1,000 and a maximum contribution of Rs 12,000 per annum during the financial year 2010-11. The scheme will be available for another three years, Mukherjee had said in the budget.

The New Pension Scheme was launched for the unorganised sector on May 1,2009. Although the scheme is touted as among the best retirement plans in the country,the number of subscriptions garnered so far tell a different tale. As on July 30,the unorganised sector had just 10,340 subscribers. NPS is a defined contribution pension scheme open to any Indian citizen between the age of 18 and 55. To give a fillip to this scheme,the finance minister in this Budget announced this initiative.