ISLAMABAD, Jan 6: The government has decided to offer an additional 1.5 per cent profit rate to pensioners on all the National Saving Schemes (NSS).

Official sources told Dawn that a meeting, presided over by Prime Minister’s Advisor on Finance Shaukat Aziz, held here on Monday, approved a “special package” for pensioners to be announced this week.

The package has been sent to the law ministry for vetting which will also later include widows to get an increased rate of return by the Central Directorate of National Savings (CDNS).

Currently, 5 per cent to 10.02 per cent rate of profit was being offered on various NSS which was still considered the highest compared to what other commercial banks and the Development Financial Institutions (DFIs) offered on various of their instruments.

“There are a lot of good features of the new special package for pensioners, including the liberal encashment facility and higher rate of interest,” said a senior official of the ministry of finance.

When contacted, he said that basically there was a one per cent increase in the rate of profit but removal of some of the penalties and better encashment facility on all NSS certificates would offer roughly 1.5 per cent additional profit to the pensioners.

The federal government will extend from its own budget the increased rate of profit to be offered first to the pensioners and later to the widows. The package, the sources said, will take effect the moment it was announced by the advisor on finance at a news conference this week.

The government had earlier reduced last week about 1 to 1.5 per cent profit rate on all national saving schemes, following a reduction in the interest rate by the banks.

Officials defended this reduction in profit by saying that richer classes had been investing in saving schemes to get an increased rate of return. This profit, they said, should be offered to pensioners, widows or those who did not have much income.

Low interest rate, officials said, encouraged investment and promoted growth. Many countries had pursued prudent monetary and fiscal policy and succeeded in keeping inflation rate low.

Accordingly, interest rates all over the world have declined in recent years. For example, LIBOR currently ranges between 1.0 and 1.5 per cent as against 5.0 and 5.5 per cent some two years ago.

The CDNS is a an attached department of the finance division and performs deposit bank functions by selling government securities through a network of 366 saving centres spread all over the country.

As of March 31, 2002, there were about 4.2 million investors with NSS. The seven saving schemes currently in operation are: Defence Saving Certificates, Special Savings Certificates/Accounts, National Deposits Certificates, Saving Account, Regular Income Certificates, “Mahana Amdani” Account and Prize Bonds.

During the year 2000-01, net deposits with National Savings Schemes fell to Rs51.1 billion from Rs142 billion in 1998-99 and Rs95.5 billion in 1999-2000.

Defence Saving Certificates at Rs16.6 billion maintained the top position. Their share in the net accruals was 32.5 per cent in 2000-01, followed by the national prize bonds (20.3 per cent) and Special Savings Certificates (18.4 per cent).