If you have been vacillating over whether to open an account under the New

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Pension System (NPS), finance minister, Pranab Mukherjee might have done his bit to help sort out the dilemma.

Mukherjee has set aside Rs 100 crore for 2010-11 as the government’s co-contribution, to be split into

Rs 1,000 per account opened during the year, if the subscription account during the financial year is between

Rs 1,000 and Rs 12,000.

“We hope the measure will have a positive impact to the NPS since the Rs 100 crore set aside will create a scope for 10 lakh new accounts to be opened during the financial year,” Rani S Nair, executive director, Pension Fund Regulatory and Development Authority (PFRDA), told FC.

Thus, under the ‘swavalamban’ (self-dependence) scheme, if you put in say Rs 5,000 during the year in your NPS account, the total amount that would be managed by your pension fund manager would be

Rs 6,000, which would include the Rs 1,000 pooled in by the government. The scheme will be available for three financial years starting from financial year 2011.

Nair explained that for the time being since the present NPS permits a minimum investment of Rs 6,000, the benefit would be available from Rs 6,000-12,000. However, the scheme could be fully availed of from April 1, 2010, when the low-cost NPS is launched. “We are launching the low-cost NPS from April 1. There will be no lower limit of subscription in that but we will be encouraging a minimum subscription of

Rs 100 a month around

Rs 1,200 a year. That will make the subscriber eligible for the co-contribution of

Rs 1,000 from the government. That should be a good enough incentive for opening an account under the NPS,” Nair said.

Balram Bhagat, CEO, UTI Retirement Solutions, one of the six pension fund managers licenced by PFRDA, agrees with Nair. “The measure will surely bring in a large number of new subscribers into NPS. Any such measure of co-contribution is always beneficial to the subscribers,” Bhagat said.“Once the account is started, it will automatically help in developing a savings habit. Even with the lowest slab, that would bring in the government’s co-contribution,” he said.