Govt mulling over assured pensions at 40-45% as some states move back to OPS: Report
2 min read 21 Jun 2023, 06:46 PM ISTThe development comes as many Opposition-ruled states in India have moved back to the Old Pension Scheme (OPS) and some even some BJP-ruled states have expressed their discomfort with the National Pension Scheme
PremiumAmid the politics of the Old Pension Scheme vs National Pension Scheme, the Government of India officials on Wednesday said that they are mulling over some changes in the new market-linked pension scheme which will ensure employees a minimum pension of 40%-45% of their last drawn salary, a report by Reuters said. The officials however cleared that "we will not go back to the old pension system."
The development comes as many Opposition-ruled states in India have moved back to the Old Pension Scheme (OPS) and some even some BJP-ruled states have expressed their discomfort with the National Pension Scheme. As the political parties started using the pension issue in elections, the government set up a committee in April to review the National Pension Scheme.
The review comes amid polls in many crucial states and Lok Sabha elections in 2024.
With changes in the National Pension Scheme and assured minimum pension of 40%-45%, the government is attempting to strike a balance between politics and economics. The pensions of government employees take away a large chunk of the Union Budget.
Old Pension Scheme vs National Pension scheme
In the Old Pension Scheme (OPS) framework, the Government of India guaranteed a fixed pension of 50% of an employee's last drawn salary. Moreover, the employees didn't need to contribute anything to their pensions during their working life.
Citing the heavy fiscal burden on the Union Budget, the government introduced the National Pension Scheme in 2004 which requires employees to contribute 10% of their basic salary and the government 14%. The pension will then depend upon the returns on the corpus, most of which is invested in the federal debt, the Reuters report explained.
The re-consideration by the government of the National Pension scheme is maybe driven by the concerns of government employees and need for another way to ensure a fiscally sustainable pension scheme for India.
Rajasthan, Jharkhand, Chhattisgarh, Himachal Pradesh, and Punjab are some states which moved back to OPS.