Government to set up panel to improve NPS

The decision comes in the backdrop of several non-BJP states deciding to revert to the DA-linked Old Pension Scheme

Amid growing demands for moving back to the old pension scheme, the government on Friday announced setting up a committee headed by the union finance secretary to look into the issues and concerns related to pensions while maintaining fiscal prudence.

“I propose to set up a committee under the finance secretary to look into the issue of pensions and evolve an approach which addresses the needs of employees while maintaining fiscal prudence to protect common citizens,” Finance Minister Nirmala Sitharaman said in Lok Sabha, the lower house of parliament.

The government’s announcement comes at a time when several opposition ruled states have opted to move back to the old pension scheme, under which retired government employees receive 50 per cent of their last drawn salary as monthly pension.

Also Read | Govt warns of ‘consequences’ if staff join OPS stir

The old pension scheme is DA-linked. So the amount of pension keeps increasing with a hike in the dearness allowance (DA) rates.

The states that have announced their decisions to revert to the old pension scheme include Rajasthan, Himachal Pradesh, Chhattisgarh, Jharkhand and Punjab.

These states have requested the centre to refund their share from the corpus accumulated under the National Pension System (NPS).

“Representation has been received that the national pension system for government employees needs to be improved,” the finance minister said.

Sitharaman further added, “the approach will be designed for adoption by both central and state governments.”

The central government employees, except those in armed forces, who have joined on or after 1 January 2004 are not covered under the old pension scheme.

The national pension scheme was launched in January 2004 for the central government employees. Most of the states have also joined the scheme. In 2009, it was opened to all sections.

Finance Secretary TV Somanathan, who is set to head the review panel, has recently said that the money from the NPS corpus can’t be refunded to any state government.

“The Government of India or the pension fund regulatory authority is in no position to refund the money to any state government. It’s just not legally possible,” Somanathan said last month.

NPS is a voluntary, contribution-based retirement savings scheme, while the burden of OPS falls on the exchequer.