Good news for Employees! Govt announced to review NPS and make changes in pension scheme

Finance Minister Nirmala Sitharaman announced plans to address issues with the New Pension Scheme (NPS) while ensuring fiscal prudence during her Budget speech on Tuesday.

NPS Review and Progress

Committee Formation

Last year, the finance ministry set up a committee under Finance Secretary T.V. Somanathan to review the NPS for government employees and suggest necessary changes. This move came after several non-BJP-ruled states decided to revert to the DA-linked Old Pension Scheme (OPS), and employee organizations in other states raised similar demands.

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Committee Progress

In her speech, Sitharaman highlighted that the committee has made considerable progress. She noted that the staff side of the National Council of the Joint Consultative Machinery for Central Government Employees has taken a constructive approach.

Planned Solutions

Balanced Approach

The Finance Minister emphasized that a solution will be evolved to address relevant issues while maintaining fiscal prudence to protect common citizens.

Old Pension Scheme (OPS) Overview

Under the OPS, retired government employees receive 50% of their last drawn salary as monthly pensions, with the amount increasing according to DA rates.

Social Security Improvements

Increased Deductions

To improve social security benefits, Sitharaman announced an increase in the deduction of expenditure by employers towards NPS from 10% to 14% of the employee’s salary. This deduction will also be extended to employees in the private sector, public sector banks, and undertakings opting for the new tax regime.

NPS-Vatsalya Plan

The Finance Minister proposed the ‘NPS-Vatsalya’ plan, allowing parents and guardians to contribute to NPS accounts for minors. Upon reaching adulthood, these accounts can be seamlessly converted into regular NPS accounts.

Conclusion

The announcements reflect the government’s commitment to evolving the NPS framework to address concerns while ensuring fiscal responsibility. The proposed measures aim to enhance social security benefits and provide flexible pension options for the future.