Under the National Pension System (NPS), the central government is thinking of implementing an initiative to ensure that its employees receive a pension equal to 50% of the last drawn salary. According to a report by The Times of India, the purpose of this initiative is to address issues regarding the pay-out disparities between the Old Pension Scheme (OPS) and NPS.
Addressing Pay-out Disparities
The NPS offers high returns for those who stay invested for 25-30 years. However, the pension payout has become a significant issue after several political parties promised to bring back the OPS during elections. The OPS guarantees a lifelong pension of 50% of the last drawn salary, updated with Pay Commission recommendations, while the NPS, being a market-linked scheme, does not offer such a guarantee.
Committee Evaluation and Recommendations
To examine the ramifications of this choice, T V Somanathan, the Finance Secretary, constituted a committee. Following a thorough investigation and calculation, the committee recommended that the Centre be able to provide a 40–45% guarantee. A 50% promise was not specifically stated, though.
Employees Demands and Government’s Response
A portion of central government workers has been calling for a guarantee of fifty percent of the final salary for individuals who work twenty to thirty years. Although the Centre has ruled out any possibility of reverting to the OPS, it is now thinking of providing some consolation in the form of a pension payout.
Financial Sustainability and Global Practices
Government plans to establish a special fund, akin to corporate retirement benefits, to guarantee the financial viability of this choice. In order to comprehend the financial effects of providing guaranteed returns, the Somanathan committee looked at international practices. Numerous dialogues have taken place to assess various facets of this choice, striking a balance between financial responsibility and worker well-being.
Future Steps
The central government will have to step in to fill the gap between the current NPS and the proposed guaranteed payout. This move, if implemented, could provide significant relief to government employees and ensure a more secure retirement.
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