BJP-led NDA government plans to significantly increase the pension payments provided to central government employees under the National Pension System (NPS). Relative to the present market-based returns system, the proposal provides a pension guarantee of up to 50% of the last basic pay.
Finance Secretary-led Pension Scheme Committee
A committee headed by Finance Secretary T V Somanathan was formed by the Narendra Modi government in March 2023 to look for ways to enhance pension benefits under the New Pension System (NPS) without going back to the non-contributory Old Pension System (OPS), which has been determined to be financially unfeasible. This came as many states started abandoning the NPS to revert back to OPS.
The panel, which included Annie Matthew, Deepak Mohanty, head of the Pension Fund Regulatory and Development Authority, and Radha Chauhan, special secretary in the Finance Ministry’s Expenditure Department, was not given any timeline for completing this task.
The report submitted in May by the committee closely aligns with the Andhra Pradesh NPS model which was introduced in 2023. The Andhra Pradesh Guaranteed Pension System (APGPS) Act, 2023 provides a monthly pension equal to 50% of the most recent basic pay drawn in situations where the annuity is insufficient.
In addition to this, a monthly annuity equivalent to 60% of the insured sum is assured to the surviving spouse of a dead subscriber. As specified in the Act, cost of living increases based on inflation would likewise be applied to the most recent basic pay draw.
What does NDA’s NPS proposal suggest?
If the proposed scheme comes into effect, it would promise a pension of 40-50 percent of the last year along with adjustments based on years of service and withdrawals from the pension corpus. If implemented, around 8.7 million central and state government employees, who have been enrolled in the NPS since 2004 would be benefitted.