For the employees of state governments, state autonomous bodies, and Central autonomous bodies, upon exercising the choice of investment schemes and pension funds, their entire accumulated corpus under their PRAN account shall be transferred to the opted pension fund or asset allocation in one instance. Earlier in June 2020, it was decided that State Governments (SGs) / SABs (State Autonomous Bodies)/ CABs (Central Autonomous Bodies) are free to adopt the provisions based on their own internal approvals and notifications, without seeking the PFRDA approval.
It was suggested that the transfer of a huge legacy corpus in respect of Government subscribers from the existing Pension Funds is likely to impact the market. It may be practically difficult for the PFRDA to allow Government subscribers to change the Pension Funds or investment pattern in respect of the accumulated corpus, in one go. Therefore, for the present, change in the Pension Funds or investment pattern is allowed in respect of the incremental flows only.
New NPS rules
Now, in its February 15, 2021, circular, PFRDA has clarified the following:
In case the State Governments (SGs) / SABs (State Autonomous Bodies)/ CABs (Central Autonomous Bodies) decide to open up the choices of Pension Funds and/or allocation of funds, then please note that upon exercise of choice of investment schemes and pension funds by subscribers, their entire accumulated corpus under their PRAN account shall be transferred to the opted Pension Fund(s) / asset allocation in one instance.
In case of the subscribers, who have already exercised this option, their legacy fund shall be transferred to the Pension Fund and asset allocation opted by the subscribers immediately. The same is now being followed for the Central Government subscribers as well.
The above arrangements are applicable with immediate effect from the date of issuance of this circular.
For streamlining the implementation of the National Pension System (NPS), the Gazette Notification dated 31st January 2019 issued by the Ministry of Finance, Department of Financial Services had already modified the Ministry of Finance’s Notification dated 22nd December 2003.