Indian government has launched the Unified Pension Scheme (UPS) as a response to growing concerns among young government employees about the adequacy of their pension benefits.
The new scheme, designed to address issues of income stability and family security, integrates key features from both the Old Pension Scheme (OPS) and the National Pension System (NPS). By enhancing government contributions and offering a defined assured pension, the UPS aims to provide a more secure and predictable retirement income for central government employees.
Here are the 10 key details on the new pension scheme:
1. Unified Pension Scheme (UPS) got inroduced to address concerns among young government employees about receiving less than 50% of their salary as pension. It incorporates features from both the Old Pension Scheme (OPS) and the National Pension System (NPS).
2. The UPS provides a defined assured pension, family pension, and a minimum pension for those who do not complete the mandatory service period for a full pension. These features aim to offer more stability and security for government employees.
3. The UPS increases the government’s contribution to the pension scheme to 18.5% of the basic pay, up from the current 14%. The employee’s contribution remains unchanged at 10% of the basic pay. This adjustment is intended to fill the gap between the assured 50% pension and the returns from the pension corpus.
4. Implementing the UPS will cost the government approximately Rs 6,250 crore in the first year. Additionally, there will be an extra expenditure of Rs 800 crore to cover arrears for employees retired since the NPS was introduced in 2004.
5. The introduction of the UPS is seen as a political move to address dissatisfaction among government employees, who are a significant voter base. This change may also be influenced by upcoming elections and the need to respond to political challenges.
6. The new UPS is likely to be adopted by most states, following the central government’s lead. However, this could put additional financial pressure on state governments, potentially straining their budgets.
7. The UPS aims to prevent states from reverting to the OPS, a trend observed in several states in the past. Most states are expected to align with the new UPS structure due to the central government’s endorsement.
8. Cabinet Secretary TV Somanathan has emphasized that the UPS is financially prudent. It maintains a contributory, funded scheme structure, unlike the OPS, which is unfunded and non-contributory.
9. The UPS combines elements from both the OPS and the NPS. It offers the assured benefits of the OPS while maintaining the contributory and funded nature of the NPS.
10. The Reserve Bank of India (RBI) has previously raised concerns about the financial strain of reverting to OPS. Under OPS, pension liabilities could reach over Rs 17 lakh crore, compared to Rs 4 lakh crore under the NPS, posing a significant financial risk.
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