Government May Change The New Pension Scheme For a 40%–45% Assured Pension – News18

The ongoing debate between certain states and the central government regarding the New Pension Scheme (NPS) and the old pension scheme for government employees has gained significant attention. Reports suggest that the central government may offer government employees 40% to 45% of their pension by making modifications to the NPS, while ensuring fiscal prudence.

This contentious topic has become a focal point in recent elections, with many opposition parties advocating for changes in the NPS. States such as Jharkhand, Chhattisgarh, Punjab, and Himachal Pradesh have demanded the reinstatement of the old pension scheme, but the central government currently has no plans to bring it back.

Responding to the increasing demands for changes in the NPS, the government has established a four-member panel to review the scheme ahead of the 2024 general elections, during which Prime Minister Narendra Modi will seek a third term.

Union Finance Minister Nirmala Sitharaman, while considering the Financial Bill 2023, stated that the new pension scheme will be applicable to both state and central governments.

The central government has no intention to reintroduce the old pension policy; instead, it aims to introduce an assured pension under the NPS. According to reports, the government plans to make slight adjustments to the market-linked NPS for the benefit of employees. It is anticipated that the government will guarantee a minimum pension of 40% to 45% for government employees, necessitating a minor alteration to the NPS.

Under the current NPS scheme, employees are required to contribute 10% of their salary, while the government contributes 14%. The accumulated corpus is primarily invested in government debt securities.

The new pension scheme is applicable only to government employees who joined the service on or after April 1, 2004. These employees will receive an assured pension of 40% to 45% of their last drawn salary. Government officials have noted that under the current National Pension policy, employees receive approximately 38% of their last salary as a pension. By guaranteeing a 40% return, the government would only need to cover a 2% shortfall. However, if the market-linked returns are higher, government expenses could increase in the future.

It is important to note that these developments are subject to further review and approval, as the government aims to strike a balance between the demands of government employees and fiscal responsibility.