India considering option to offer 50% pension for govt employees under NPS

 Amid the raising demands from several states to restore the Old Pension Scheme (OPS), which provided guaranteed pensions to government employees, reports have emerged that the Central government is exploring the option to offer a guaranteed pension of around 50 percent of the last pay drawn to government employees under the National Pension System (NPS).

The debate around the OPS and the NPS has been ongoing for some time, with many employees arguing that the NPS is not a suitable replacement for the OPS. The issue has been a point of contention between the Centre and states, with some state governments pushing for its return due to their employees' dissatisfaction with the NPS and its lack of guaranteed pensions.

On February 7, Union Minister of State for Finance, Dr Bhagwat Karad, in a written reply to a query in the Rajya Sabha said, "The National Pension System (NPS) was introduced by the Government of India to replace the defined benefit pension system by defined contribution pension scheme in order to provide old age income security in a fiscally sustainable manner and to channelize the small savings into productive sectors of the economy through prudential investments."

"Representations have been received from time to time which include the request for restoration of Old Pension Scheme. However, there is no proposal under consideration of Government of India for restoration of old pension scheme in respect of Central Government employees recruited on or after 01.01.2004," Karad added, confirming the Central government's stand.

About old pension scheme

In the old pension regime, pension was 50 percent of the last drawn salary of the employee and the entire amount was paid by the government.

How is it different from the current one?

The old pension scheme was discontinued on April 1, 2004, and replaced with the National Pension System (NPS). NPS, a government-run investment scheme, gives the subscriber the option to set the preferred allocation to different asset classes. The returns in NPS are not guaranteed and depend on the performance of the asset allocation by the subscriber based on his/her risk-taking capability during the employment tenure.

Under this scheme, the employees contribute 10 percent of their salary towards pension, and the state government contributes 14 percent. The amount is then deposited with Pension Fund Regulatory and Development Authority (PFRDA), where it is invested.