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Centre notifies committee on pension schemes for govt employees

Kolkata, April 6, 2023

The panel will devise its own procedure and mechanism, including consulting with the states, to arrive at its recommendations

The Centre, on Thursday, notified the committee headed by Finance Secretary TV Somanathan to take a deep dive into the issue of pension for government employees.

This comes amid a number of states ditching the New Pension Scheme (NPS) and moving back to the older one, for their employees.

According to a memorandum, the panel will comprise Somanathan, secretary of Department of Personnel & Training; Radha Chauhan, special secretary in Finance Ministry’s Expenditure Department; Annie Matthew, and Deepak Mohanty, chairman of Pension Fund Regulatory and Development Authority.

The panel will deliberate on whether any changes are required to the National Pension System, and suggest the measures which will improve pensionary benefits for government employees while maintain fiscal prudence for the exchequer. The panel will devise its own procedure and mechanism, including consulting with the states, to arrive at its recommendations.

The OM gave no deadline as to when the panel will submit its report.Finance Minister Nirmala Sitharaman had said last month in Lok Sabha that a committee will be set up under Somanathan to look into the pension issues of government employees. "I propose to set up a committee under the Finance Secretary to look into the issue of pensions and evolve an approach which addresses the needs of employees while maintaining fiscal prudence to protect common citizens," Sitharaman had said while speaking on the Finance Bill.

"The approach will be designed for adoption by both the central government and state governments," she had said.

The move comes in the backdrop of several non-BJP states deciding to revert to the dearness allowance-linked Old Pension Scheme (OPS) and also employee organisations in some other states raising demand for the same.

The state governments of Rajasthan, Chhattisgarh, Jharkhand, Punjab and Himachal Pradesh have informed the Centre about their decision to revert to the Old Pension Scheme and have requested a refund of corpus accumulated under the NPS.

The OPS offers fixed pensions to employees after retirement. The pension amount is 50 percent of their last drawn salary. NPS, meanwhile is an investment cum pension scheme. NPS contributions are invested in securities like debt and equity instruments. Thus, it does not guarantee fixed pensions but provides high returns in the long term, resulting in a significant lump sum and monthly pensions.

The centre has been allowing states to increase their borrowing limits by the same amount as which they are annually contributing to new NPS accounts for their state government employees. Those states reverting to OPS will not get that much extra borrowing room.

Meanwhile Andhra Pradesh has proposed a Guaranteed Pension Scheme (GPS), which combines the elements OPS and NPS. The scheme, proposed for the first time in April 2022, offers a guaranteed pension of 33 per cent of the last drawn basic pay without any deduction to the state government employees. For this, they would need to contribute 10 per cent of their basic salary every month, and the state government will match it.

[The Business Standard]

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