The pensioners, senior citizens and widows have appealed to the government not to further reduce the profits on the NSS schemes as the federal government is reportedly going to announce new profit rates on various national saving schemes from April 1, 2015 following reduction of policy rate by 50 basis points from 8.5 percent to 8 percent by the State Bank of Pakistan.
Talking to Business Recorder at a few branches of NSS directorate here on Thursday they said that the government had already substantially cut the profits in February 2015 for specialised savings schemes-Bahbood Savings Certificates and Pensioners' Benefit Account when the SBP decreased the discount rate by one percent.
They said the pensioners/elderly people and widows are being paid monthly profit of Rs 940 on investment of each Rs 100,000 against the earlier rate of Rs 1280. Any further cut in the interest rate would make their lives more miserable.
Similarly, a monthly profit of Rs 746 on regular schemes (including withholding tax) is paid on investment of each Rs 100,000. This way the profit rate works to 8.952 percent p.a. However, if the profit rate is further reduced commensurate with the new mark-up rate of 8 percent, the profit would dip to meagre Rs 650 per month.
They said the government has been influenced by capitalist class who propagate that providing widows, the elderly and retired couples with a safe investment avenue yielding profits that are higher than the returns on products offered by private-sector asset management was hampering growth in the private sector.
The NSS account holders believe that these schemes provide ordinary people with an effective, risk free social safety net besides increasing the rate of savings in the economy.
It may be added that National Savings Schemes (NSS) flag ship products including prize bonds, Defence Savings, Behbood Savings, Special Savings and Regular Income certificates mobilised Rs 66.111 billion in the first quarter of 2014-15 which was 50.9 percent higher than the savings mobilisation achieved during the corresponding three-month period of 2013-14.
In September alone, the amount of savings in a number of schemes under the NSS clocked up at Rs15 billion. However, a manager of an NSS branch told this scribe that investment in NSS has decreased after 1.5 percent drop in the interest rate during past two months.
Private investors said that lowered returns offered by the government on investment in National Savings Schemes have resulted in heavy investment in property business that is fetching greater profits.
While the vulnerable small investors like pensioners/senior citizens and widows were finding it difficult to manage their households.
However, the financial experts said that the single digit interest rate would provide a sigh of relief to the federal government that is constrained by poor foreign financial inflows and a narrow tax base, for its public debt shot up by a record Rs 1 trillion during the first quarter of current fiscal year, according to SBP's report.
The report said that growth in credit to private sector during Jul-February FY15 has remained subdued at Rs 158.9 billion compared to Rs 298.3 billion in the same period of FY14.
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