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The NDA government reversed a 21-year-old pension reform measure.
A new "Unified Pension Scheme" (UPS) was introduced.
The UPS is similar to the Old Pension Scheme (OPS).
Introduction of the Unified Pension Scheme (UPS):
The government unveiled a new ‘Unified Pension Scheme’ (UPS).
The UPS closely resembles the Old Pension Scheme (OPS).
It assures government employees of 50% of their last drawn pay as a lifelong monthly pension.
Key Features of the Unified Pension Scheme:
The UPS includes periodic increases in dearness relief to align with inflation trends.
In the event of a government employee's death, the family will receive 60% of the pension as a family pension.
Upon retirement, employees will receive a lumpsum superannuation payout along with gratuity benefits.
A minimum pension of ₹10,000 per month is guaranteed for those who complete at least 10 years of Central government service.
Basis for the Cabinet Decision:
The decision was based on recommendations from a committee led by former Finance Secretary T.V. Somanathan.
The committee was set up in March 2023 to review the National Pension System (NPS) for government employees.
The aim was to balance employees’ aspirations with fiscal prudence.
Details of the National Pension System (NPS):
The NPS applied to employees who joined government service on or after January 1, 2004.
Pensions under the NPS were based on the accumulated contributions of both the government and the employee.
These contributions were invested in market-linked securities, regulated by the Pension Fund Regulatory and Development Authority (PFRDA).
State governments have the option to adopt the UPS, which will be effective from April 1, 2025.
The primary difference between the OPS and UPS is that OPS was unfunded and did not require contributions from employees or the employer.
The UPS, however, is a contributory scheme, with employees contributing 10% of their salary and the government contributing 18.5%.
Employee contributions to the UPS will be fixed at 10% of their salary.
The government’s contribution rate of 18.5% may be adjusted periodically based on actuarial assessments.
Employees who joined service since 2004, including those who have retired, have the option to switch from the NPS to the UPS.
The NPS will continue to be available as an option for those who prefer it.
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