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The government is considering ensuring a minimum pension of 40-45% of the employee's last basic salary and dearness allowance. It is believed that a final decision on this matter may be made before the upcoming general elections.
The central government is preparing for significant changes in the National Pension Scheme (NPS) so that employees abandon the demand for restoration of the old pension scheme (OPS). According to media reports quoting a senior official, the government is considering ensuring a minimum pension of 40-45% of the employee’s last basic salary and dearness allowance (DA). It is believed that a final decision on this matter may be made before the upcoming general elections. However, no official statement has been released yet.
The demand for the revival of the old pension scheme has been gaining momentum lately. The revival of the old pension system became a major issue in the assembly elections of several states. States such as Rajasthan, Chhattisgarh, Punjab, and Himachal Pradesh have already restored the old pension system for their government employees. In this scenario, if the government puts its stamp on the proposal for a guaranteed minimum pension in NPS, it may provide significant benefits to the ruling Bharatiya Janata Party in the upcoming general elections. It should be noted that amid increasing opposition to the new pension scheme, the central government has also formed a four-member committee to review the NPS and work on improvements.
How much pension will be given?
Take for example, Ramesh Thakur is an employee of the central government. His total salary is one lakh rupees, with a basic salary and DA of 80,000 rupees. If the government guarantees a 45% pension, Ramesh’s pension at the time of retirement could be 36,000 rupees. However, there has been no detailed explanation from the government on this matter.
What is the current arrangement?
NPS applies to employees who joined government service after April 1, 2004. Under the current NPS, employees have to contribute 10% of their basic salary, and the government contributes 14%. The returns depend on the market. Currently, on reaching the age of 60, a member of the National Pension Scheme can withdraw up to 60% of the corpus from the retirement fund tax-free, while the remaining 40% has to be used to purchase an annuity, ensuring a fixed amount of periodic payment. There is no guarantee regarding the amount of pension under this arrangement.