Search the Internet          Tips  Sites: Finance, Investment

Panel moots 'funded system' to pare govt's pension liability

The working group on pension liability, headed by A M Sehgal, on Monday suggested a new 'funded system', which calls for contribution from employees, to restrict pension liability to Rs 295 billion by 2009-10 from a staggering Rs 214 billion last fiscal.

After submitting the report to Union Finance Minister Yashwant Sinha, the working group chairman A M Sehgal told reporters that there was a 'pressing need' to reduce pension liability of the Centre by switching over to the funded system.

"Pension liability to GDP ratio can come down to about 0.5 per cent by 2009-10 (assuming an average annual GDP growth of 9 per cent) from the current 0.96 per cent," he said.

Fortunately, the pension liability is not so alarming as might have been apprehended, Sehgal said, adding the funded system would ensure that the liability is restricted within Rs 295 billion to Rs 335 billion by 2009-10, as against Rs 214 billion last fiscal.

Sehgal, who is also the Controller General of Accounts, said the liability would be Rs 295 billion if inflation rate remains 6 per cent, but go up to over Rs 317 billion if inflation rate averages 8 per cent.

The figure could even go up to Rs 335 billion if inflation rate goes up to 10 per cent, he said.

The working group was constituted by the Centre to review the pensionary liability of the Union government over the short-medium term and recommend appropriate formats and information system to facilitate accurate assessment of liabilities in future.

Tell us what you think of this report