Friday, May 01, 2009

Government launches new pension scheme

Ignoring the convenient timing of the announcement -- frankly, the postponing of the announcement by a month doesn't really cut it -- the idea of a pension scheme in which one can invest up to 50% in the stock market is simply abominable. Here's a suggestion: why don't they rename it from NPS to 401K?

Update: Now the IT sector is contemplating a switch to the new scheme. The article touts a number of benefits of the new scheme over EPF:
NPS scores over EPFO on several counts. While EPFO follows a moribund investment pattern with no equity exposure, NPS allows members to design their own retirement portfolio and offers six different fund managers to choose from. EPFO's service delivery and account keeping is de-centralised and a recent audit found that over 90% of EPF members' accounts are inaccurately maintained. With a professional central record-keeping agency in place, NPS is better placed on this front.

Workers can check their pension fund balances online, far advanced than the delayed annual contribution slips EPFO sends.
Frankly, except for the better record-keeping, the rest of the reasons are in no way deal-clinchers (note how the EPFO's lack of exposure to the equity market is dismissed as a "moribund investment pattern"). Also, good luck with backing the horse -- aka 'fund manager' -- most likely to win.