NPS: In a major move towards addressing concerns over payout disparities, central government employees covered under the National Pension System (NPS) may soon be assured of 50 per cent of their last drawn pay as pension. This development follows a report by The Times of India, indicating the government's commitment to enhancing pension security for its employees.
Finance Minister Nirmala Sitharaman's recent announcement led to the establishment of a committee, chaired by Finance Secretary TV Somanathan, to explore this initiative under the National Pension System. While ruling out a return to the Old Pension Scheme (OPS), the government is keen on providing a level of comfort, especially as Opposition advocate for reinstating the previous pension system.
The OPS offers a defined benefit of half of the last salary drawn as a lifelong pension, adjusted according to Pay Commission recommendations. In contrast, the NPS is a defined contribution scheme, where employees contribute 10 per cent of their basic salary, matched by a 14 per cent contribution from the government.
The Somanathan committee has reviewed global practices and examined adjustments made by state governments like Andhra Pradesh. Extensive assessments have been conducted to estimate the impact of offering assured returns. The TOI report suggests a growing momentum within the government to guarantee 50 per cent of the last pay drawn for employees who serve 25-30 years, with potential shortfalls being covered by government funding.
Officials argue that employees who remain invested for 25-30 years are receiving satisfactory returns comparable to OPS pensioners. Criticism regarding low payouts mainly arises from those who exit the scheme before completing 20 years.
To ensure financial sustainability, the government plans to create a dedicated fund similar to corporate retirement benefits. Ongoing discussions aim to balance fiscal prudence with employee welfare under the evolving pension framework.