The Ministry of Finance has set up a committee to review the pension system for government employees. The committee aims to improve the pension benefits of the beneficiaries under the National Pension System (NPS). The committee has been constituted under the leadership of Finance Secretary TV Somanathan.
It will suggest whether any changes are necessary for the existing structure of the NPS applicable to government employees. The committee will suggest modifications to improve the pensionary benefits of government employees covered under NPS, keeping in view the fiscal implications and the overall budgetary impact.
The decision to form the panel comes against the backdrop of some states implementing an old pension system with an assured pension as a share of the last drawn salary.
Some states have promised the implementation of the old pension scheme owing to populist measures. However, the imposition of the old pension scheme may burden their exchequer. In the panel committee, the finance ministry has inducted secretaries of the Department of Personnel and Training, a Special Secretary in the Department of Expenditure and a Chairman of the Pension Fund Regulatory & Development Authority (PFRDA). The decision is important ahead of the general elections in 2024.
The decision to set up the committee also drew reference to Finance Minister Nirmala Sitharaman, who last month said in Lok Sabha, that a committee would be established to investigate pensions to develop a strategy for meeting the demands of public employees while upholding fiscal responsibility.
The state governments of Rajasthan, Chhattisgarh, Jharkhand, Punjab and Himachal Pradesh have notified the centre of their decision to go back to the old pension system (OPS) and have asked for a refund of the NPS funding. In a statement to Parliament last month, the finance ministry stated that it is not considering any proposals to reinstate the OPS for central government employees hired after January 1, 2004. Government employees who retired under the OPS were given monthly pensions equal to 50% of their final drawing wages. With the increase in DA rates, the amount keeps rising. Because OPS is non-contributory and the cost of the exchequer is growing, it is not financially viable.
Except for individuals in the armed forces entering the central government on or after January 1, 2004, NPS has been introduced for all government employees. The majority of state and union territory governments have also informed NPS of their new hires.
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