Current scenario of_social_security_in_india_2
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    Current scenario of_social_security_in_india_2 Current scenario of_social_security_in_india_2 Presentation Transcript

    • Current Scenario of Social Security in India Financial Management Submitted by Roll No. 11-20 MBA (AB) 2009-11
    • Presentation Contents
    • Social Security
    • 3 Pillars of Pension System
    • Scenario of Pension in India
      • The main objective of any social security system is the provision of a socially adequate and equitable retirement protection system on a sustainable basis.
      • The Current Regulator : Pension Fund Regulatory and Development Authority
    • Statistics
      • India has nearly eighty million elderly people, which is one eighth of world’s elderly population.
      • This segment of population is growing at a rate of 3.8% per annum as against a rate of growth of 1.8% for the overall population.
      • A vast majority of this population is not covered by any formal old age income scheme and are dependent on their earnings and transfer from their children or other family members.
    • Scenario of Pension in India
      • Pensions in India can be divided into three categories
        • Government pensions
        • Schemes that come under an Act
        • Voluntary pensions
    • Government Pensions
      • The Government amended the regulations to put in place the New Pension System.
      • The old scheme continues for the existing employees (i.e. those who joined service prior to January 1, 2004).
        • Central government pensions
          • Civil servants pensions
          • Defence
          • Railways
          • Posts
        • State government pensions
    • Pensions under an Act
      • Acts for pensions in India
        • Pensions under the EPF&MP Act 1952
          • Employees Provident Fund
          • Employees Pension Scheme
          • Employees Deposit Linked Insurance Scheme
        • Two other Acts as well.
    • Voluntary pensions
    • Other Arrangements for Informal Sector
      • Senior Citizens Saving Scheme
      • NOAPS National Old Age Pension Scheme
      • Public Provident Fund
    • EPF
      • Establishments employing 20 or more.
      • Co-operative Societies, employing 50 or more
      • A stipulated amount (currently 12%) is deducted from the employee's salary and contributed towards the fund. This amount is decided by the government.
    • EPF
      • Available to salaried employees.
      • Tax-qualified
      • Contribution retirement benefit plan
      • Equal contribution made by the employer and the employee
      • At the specified rate
      • Payable in lump sum on retirement.
    • EPF
      • 8.5% per annum (Current)
      • Eligible for deduction under the Rs 1,00,000 limit of Section 80C
      • No tax on maturity. (After 5 Years)
    • PPF
      • Established by the central government
      • The minimum amount to be deposited in this account is Rs 500 per year.
      • The maximum amount you can deposit every year is Rs 70,000.
      • 8% per Annum (Current)
      • Accumulated sum is repayable after 15 years.
      • Eligible for deduction under the Rs 1,00,000 limit of Section 80C
      • No tax on maturity. 
    • Limitations of Existing System
      • Heavy financial burden on the Government
      • Limited coverage
      • Fragmented regulatory framework
      • Lack of individual choice and portability
      • Lack of uniform standards
      • High incidence of administrative cost
      • L ow real rate of returns
      • U nsustainable.
      • Non-sustainability of the existing pension system is accentuated by the sharp increase in financial burden on the Government and the other employers on account of pension liabilities.
    • Statistics
      • Only about 12 per cent of the working population in India is covered by some form of retirement benefit scheme.
    • New Pension System
      • Introduced in April 2004, to cover all entrants in government service.
      • After six years of its launch, only 12 States have executed the NPS scheme, eight have merely entered into an agreement with the NPS Trust.
      • NPS is now available to every citizen from 1st April, 2009 on a voluntary basis.
        • On May 1, 2009, the Pension Fund and Regulatory Development Authority (PFRDA) had thrown open the scheme to all citizens of India.
      • Annual fund management charge of 0.0009% !!!
        • Extremely low when compared to a pension plan offered by an insurance company charges a fund management charge of 0.75-1.75% of the value of the investment every year.
    • NPS
      • National Securities Depository Limited (NSDL) has been appointed as the CRA.
      • CRA : Central Record Keeping and Accountancy Agency
    • NPS
      • Indian citizen between 18 and 55 years.
      • Based on Permanent Retirement Account Number (PRAN),
      • No investment ceiling.
      • Minimum investment limit has been fixed at Rs 500 a month or Rs 6,000 annually.
      • Subscribers are required to contribute at least once a quarter
      • Investments not guaranteed
      • Choice in the investment mix
        • Equity or E (high risk but high returns),
        • Fixed income instruments or C (that come with medium risk and returns)
        • Pure fixed investment products or G (which offer low returns but have very low risks associated with them).
    • NPS
      • Equity investment is capped at 50 per cent.
      • Retirement age fixed at 60 years.
      • At 60, use at least 40 per cent of your accumulated savings to buy a life annuity from an insurance company.
      • A phased withdrawal is also allowed but the lump sum benefit has to be availed before turning 70.
      • In the current Budget, the Central government had announced that it would contribute Rs1,000 towards each New Pension Scheme account opened this year for the next 3 years.
    • NPS
      • The investment is covered under section 80CCD of the Income Tax Act
      • Tax will be levied for withdrawing the money (earned).
      • One can avoid paying tax by transferring the entire corpus to the annuity service provider.
      • PFRDA has approached the government to treat investment in NPS on a par with instruments like Employees Provident Fund and Public Provident Fund, for which no tax is levied at the investment, accumulation or withdrawal stage.
    • Thank You !
      • Any Questions ?