Centre considering pension plan based on 40-50% of employee’s last drawn basic salary
CHENNAI: The Finance Ministry plans to announce changes in the National Pension Scheme (NPS) for government employees by the end of the year.
Read More: DSP Mutual Fund launches Gold ETF Fund of Fund, NFO opens today; check details
According to a top government official, the Centre is considering adopting the Andhra Pradesh model, which guarantees a pension based on 40-50% of the employee’s last drawn basic salary. The proposed scheme will be market-linked, with the government filling any shortfall in the pension corpus. Employees will continue to contribute as before, while the government’s contribution will increase.
“The new scheme will be announced by year-end. The committee is working on the modalities of the scheme which is majorly based on Andhra Pradesh model. It will be market-linked and the centre will ensure that the pensioners get 40-50% of their last drawn salary,” a top official stated.
Read More: Which banks are giving the highest fixed deposit (FD) interest rates? Check here
Currently, employees contribute 10% of their basic salary to NPS while, the Government puts in 14% towards the employees’ NPS account. However, it is unclear if the new scheme will be inflation-linked like the Andhra scheme. The committee headed by the finance secretary is expected to discuss this further in their upcoming meeting.
As per sources, there is pressure from BJP-ruled states to amend the National Pension System and introduce a scheme similar to the old pension system to appeal to voters before elections. Some of the non-BJP-ruled states such as Himachal Pradesh, Rajasthan, Chhattisgarh, Punjab and Jharkhand have already gone back to the old pension system, under which states bear a higher burden of the pension paid to its employees.
Under Andhra’s guaranteed pension scheme, pensioners receive 50% of their last drawn basic salary along with DA, which is inflation-linked. Under Andhra’s guaranteed pension scheme, pensioners receive 50% of their last drawn basic salary along with DA, which is inflation-linked.
According to the data available with the Pension Fund Regulatory and Development Authority (PFRDA), the regulator of the National Pension System (NPS), state and central government employees account for 79% of the Rs 9 lakh crore asset under management of National Pension Scheme . The number of subscribers under various schemes under the NPS was 6.3 crore as of March 31, 2023. Out of total subscribers, the state government employees stood at 60.72 lakh, while central government e ployees were at 23.86 lakh.
Sweetening the deal
The govt is considering adopting the Andhra Pradesh model of for the New Pension System (NPS)
Employees will continue to contribute as before, while the government’s contribution will increase
The Andhra Model guarantees a pension based on 40-50% of the employee’s last drawn basic salary
The proposed scheme will be market-linked, with the government filling any shortfall in the pension corpus
The state and central government employees account for 79% of the Rs 9 lakh crore assets under management of NPS
Currently, employees contribute 10% of their basic salary to NPS while, the government pay 14% towards the employees’ NPS account
Of total subscribers, state govt employees at 60.72 lakh, while central govt employees at 23.86 lakh.
