NPS remains dormant

Employees’ pension accounts inactive pending 
release of fund by Nagaland state government 

Imkong Walling 
Dimapur | April 5

Non realisation of government schemes is not uncommon in revenue deficient Nagaland. In another such instance, employees are set to lose out on pensions, and the government on revenue, unless the government chips in its share of funds to a pension policy introduced here in 2010. 

The Permanent Retirement Accounts of state government employees covered by the National Pension System (NPS) have remained inactive since inception, awaiting release of fund from the government. The pending pension arrears of more than 3600 new entrants to government service, who joined the government workforce on or after January 1, 2010, are estimated at around Rs. 50 crores, which had accumulated over a three-year period, beginning January, 2010. 

The NPS (originally launched as ‘New Pension System’ for Central government employees in 2004) replaced the former pension policy wherein the government solely shouldered the responsibility of contributing towards the financial security of its retiring employees. In Nagaland, the NPS came into operation, in theory, in 2010. In reality, it is yet to be fully implemented. 

Under the revamped pension system, subscribers (read employees) are now required to contribute towards his or her retirement fund. It works on the principle of contributing a portion of monthly remuneration to the permanent retirement account. The contributing amount is worked out at 10 percent of basic pay, dearness pay and dearness allowance. The government, on its part, is supposed to contribute a matching amount to activate the overall amount. 

The resulting amount, procedurally stating, is routed to the retirement accounts of employees, covered by the NPS, on a monthly basis until retirement. For transparency, each employee is issued a unique Permanent Retirement Account Number or PRAN by the Central Recordkeeping Agency in-charge of the NPS, whereby the accumulation of funds can be monitored. The amount accumulated during the in-service phase can be withdrawn on superannuation.  

Toeing the new pension policy of the Central government, the Nagaland government also introduced this system for its employees in 2010. State government employees, who joined work on or after January 1, 2010, are by default subscribers of the NPS. 

Simple as it sounds, it is easier said than done in Nagaland. The government has failed to keep its side of the bargain for reasons unexplained. Not to mention the anxiety that the delay has generated among NPS subscribers, who have begun to question the motive of the government. 

Finance department officials when asked for reasons behind the delay in sanctioning of the pending pension arrears chose to play it safe, while courteously directing this reporter to the department of Treasuries & Accounts (T & A) for answers to the question asked. 

The department of T & A also could not say much on the delay, stating the department only implements the system (read NPS), while adding that the Finance department wields the overall policy-making authority. 

It was however let known that the amount deducted from each of the NPS subscribers registered till date is transferred and credited to a secure government ‘Head of Account.’ Prodded further on the status of the said account, it was disclosed the accumulated amount is lying idle, while no conclusive information was provided on the actual amount therein. 

According to data provided, there are (as on March 23, 2010) 3648 NPS subscribers under the pay of the state government.  With regard to the pending government side of the share, a T & A official disclosed that the government has announced a budgetary provision of Rs. 50 crores to make up for the arrears accumulated.  The provision, however, is yet to be set in motion. 

“Now, the department concerned (Finance) has to sanction the government’s share,” said the official, while disclosing that the department of T & A have already submitted a proposal in this regard. 

Only when the government releases its share of the contribution, the department of T & A can follow up with the necessary formalities to transfer the deducted amounts (along with the government’s contribution). According to the NPS guideline, “The employees share plus the government’s matching contribution has to be uploaded (read deposited) together,” added the official. Each employees/subscribers share is to be routed through the authorised Central Record Keeping Agency (known as National Securities Depository Limited), to their respective Permanent Retirement Accounts. 

The longer the government delays in releasing the pending fund the more interest it will incur, which it will have to reimburse ultimately, leading to an overall loss to the state. “The longer the delay from the government, the more interest the government will have to pay... because they themselves have stated so,” said the official referring to an office memorandum issued by the Finance department, dated August 27, 2012. 

Aside from the government incurring interest, another factor worrying employees/subscribers is the NPS guideline. According to this, subscribers (employees) find themselves in a situation where they cannot escape chipping in, while the government can. The Pension Fund Regulatory and Development Authority (PFRDA) have stipulated in clear terms that the minimum annual contribution in each subscriber account is Rs. 6000. “If the subscriber is unable to contribute the minimum annual contribution, a default penalty of Rs.100 per year of default would be levied and the account would become dormant. In order to re-activate the account, subscriber will have to pay the minimum contributions, along with penalty due. A dormant account will be closed when the account value falls to zero.” Without some deterrent/accountability mechanism set for the government, this could lead to an eventual loss only for the employees.