Budget 2024: The Old Pension Scheme (OPS) has been demanded for years by central government employees who joined before 2004, with the exception of those in the military forces. At that time, the National Pension System (NPS) took the role of this scheme. A number of recommendations have been submitted to the Modi government to switch from NPS to OPS for different government employees as the Union Budget 2024–25 draws near.
Growing Demand for OPS Restoration
Workers in the central government have spoken clearly that they want the OPS to be brought back. Although the Modi administration is anticipated to accept a plan for central government employees to have guaranteed pensions, it may not completely abolish the NPS. As per multiple media reports, Finance Minister Nirmala Sitharaman is expected to declare during her Budget 2024 speech that NPS personnel will be guaranteed a pension equal to 50% of their most recent income.
Efforts by Central Government Employees
Central trade unions have been in contact with Sitharaman on a regular basis, pushing for increased NPS pension benefits. OPS provides retired government employees with a lifetime pension equal to 50% of their final wage, which is periodically increased in accordance with recommendations made by the pay commission. With this “defined benefit” plan, employees are guaranteed a fixed pension amount without having to make contributions while they work.
NPS: A Defined Contribution Scheme
In contrast, the NPS operates as a ‘defined contribution’ scheme. Employees contribute 10% of their basic salary, and the government adds 14%. The pension amount under the NPS depends on the accumulated contributions and investment returns, making it variable. All central government employees who joined after April 2004 are covered under the NPS. Those who joined before 2004 remain under the OPS and continue to receive a guaranteed pension.
The Government’s Stand and New Considerations
The Centre has often stated that reverting to the OPS is not an option. However, reports suggest that the Modi government is considering a guaranteed pension amounting to 50% of the last-drawn salary for central government employees under the NPS. This move aims to address payout disparities between the OPS and NPS.
Addressing Employee Concerns
A committee led by Finance Secretary T. V. Somanathan has been examining the demand for a return to the OPS and preparing a report for the government. Employee organizations argue that having two pension systems creates income disparities among retirees with equivalent service years. Additionally, the NPS reduces take-home salaries by 10%, causing further discontent.
Pressure from Employee Groups
Various groups associated with central government employees have been pressing the government to address these concerns. The All India Railwaymen’s Federation (AIRF) has formally requested the government to reinstate the OPS. The growing demand for a fair pension system is a key issue that the Modi government will need to address in the upcoming Union Budget 2024-25.
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