Money from NPS fund can’t be transferred to states: Finance Ministry officials

Amid growing demands from the opposition ruled states for transfer of money from NPS corpus to state governments for restoration of the old pension scheme, the top finance ministry officials on Monday said there is no provision for such transfer as the money belongs to employees.

“The Government of India or the pension fund regulatory authority is in no position to refund the money to any state government. It’s just not legally possible,” said Finance Secretary TV Somanathan.

Congress and some other opposition-ruled states like Himachal Pradesh, Chhattisgarh, Punjab, Jharkhand and Rajasthan have announced plans to restore the old pension scheme (OPS). These states have requested the central government to refund their contribution made to NPS corpus.

Financial Services Secretary Vivek Joshi said under the new pension scheme the agreement is between employees and the NPS Trust. “If the states are thinking that they will get the money back... Under the present law it’s not possible,” Joshi said at a post-budget press conference in Jaipur.

The top finance ministry officials’ comment comes days after Rajasthan Chief Minister Ashok Gehlot threatened to take the matter to the Supreme Court if the states are not given the money back.

“The centre is not giving us our money deposited in the NPS. It is our money. If they will not give, then we will move the Supreme Court,” Gehlot said earlier this month.

Joshi said the money under the new pension scheme belongs to the employees and it can’t be given to any government.

If an employee decides to exit per-maturely before reaching the retirement age, he/she can get 80% as annuity and 20% lump-sum, said Joshi.

Around 50 lakh state government employees have subscribed to the new pension scheme. The government (employer) as well as employees contribute to the fund.

Total assets under management (AUM) of state government employees under NPS stood at Rs 3.65 lakh crore as on 31st October 2022. The contribution of the state government and employees under the NPS scheme stood at Rs 2.66 lakh crore, as per PFRDA data shared by the Ministry of Finance in Rajya Sabha in December.

From Karnataka, 2.59 lakh state government employees have opted for NPS. Their contribution stood at Rs 16,164 crore while AUM at Rs 22,513 crore as of October-end 2022. Rajasthan’s contribution stood at Rs 28,336 crore; Chhattisgarh’s at Rs 12,147 crore; Punjab’s Rs 13,256 crore and Himachal Pradesh’s Rs 7,119 crore.

The top finance ministry officials argued that the restoration of the old pension scheme would be bad for long-term finances of the states.

“Initially, it will appear as if the costs are zero or low because there is no pension to be paid for the next few years,” said Somanathan, adding the financial burden would be faced by the government only after 2030.

The finance secretary argued that under the old pension scheme the liability gets deferred to other governments and other generations.

“There is an inter-generational equity issue. Should the current generation pay for the pensions accrued in the current generation or should our children and grandchildren pay for the pensions for the people who are working now,” asked Somanathan.

Meanwhile, the EPFO on Monday came out with a procedure to enable subscribers and their employers to jointly apply for higher pension under Employees' Pension Scheme (EPS).

In an order, EPFO has asked its field offices to provide an option for higher pension to eligible subscribers in accordance with the Supreme Court order of last year. In November 2022, the Supreme Court had upheld the Employees Pension (Amendment) Scheme 2014.