In an effort to allay central government employees’ worries about the payout, the government is trying to guarantee those employees who are a part of the National Pension System 50% of their most recent salary taken as a pension. This is true even though the program, which was launched in 2004, offers substantial returns to participants who commit to investing for a period of 25 to 30 years.
Following a statement by Finance Minister Nirmala Sitharaman, a committee led by T V Somanathan, the finance secretary, was established.Even though the Center has ruled out going back to the Old Pension Scheme (OPS), it left the door open in order to offer some consolation when the Congress was declaring that it was going to reverse a decision that the Manmohan Singh government had made.
OPS is a defined benefit plan that provides a pension equal to half of the last wage drawn for the rest of one’s life, subject to changes based on recommendations made by the pay commission. On the other hand, NPS is a defined contribution plan in which government employees contribute 10% of their base pay and the Center matches the remaining 14%.
The Somanathan committee has conducted detailed computations to determine the impact of offering an assured return in addition to reviewing the worldwide experience and the outcomes of the Andhra Pradesh government’s adjustment. Providing a 40–45% guarantee is feasible for the Center, but it does not politically address the concerns of workers who have been there for 25–30 years. As a result, the government is beginning to recognize the value of providing a 50% guarantee. which implies that the government will cover any gaps in funding.
Since the Center lacks a retirement fund, unlike the government pension system, which is unfunded, an annual estimation will also need to be done, according to a few committee members. As is the case with businesses that offer retirement benefits to their staff, it is likely that the Center will this time around also establish a fund that will set aside money.
Officials have claimed that employees who work for 25–30 years experience sufficient returns to match the OPS pension payment, and the only people complaining about low payouts are those who have left the program early, after 20 years or less.
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Is NPS set to guarantee 50% of last drawn salary as pension?
