A committee headed by finance secretary T V Somanathan had been set up after an announcement by finance minister Nirmala Sitharaman.While the Centre has ruled out a return to the Old Pension Scheme (OPS), it kept the window open to provide a certain level of comfort at a time when Congress was announcing a reversal of a decision taken by the Manmohan Singh govt.
OPS is a defined benefit scheme, offering half the last salary drawn as pension for life and subject to adjustments in line with pay commission recommendations. In contrast, NPS is a defined contribution scheme where a govt employee provides 10% of the basic salary as his/her contribution and the Centre provides 14%.
While the Somanathan committee has looked at the global experience, as well as the results of the tweak undertaken by the Andhra Pradesh govt, it has also carried out extensive calculations to gauge the impact of providing an assured return. Although it is possible for the Centre to offer 40-45% guarantee, politically, it does not address the concern of employees who work for 25-30 years. As a result, there is growing acknowledgement within the govt of offering a 50% guarantee. Which means in case of a shortfall, the govt will fill the gap.
Also Read | Budget 2024 income tax expectations: Top 10 things FM Sitharaman should do for salaried taxpayers
This means that an annual estimation will also need to be undertaken as several committee members are of the view that unlike the govt pension system, which is unfunded as the Centre does not have a retirement fund. It is likely that the Centre will this time also create a fund that will set aside money, as is the case with companies that have retiral benefits for their employees.
Officials have maintained that those who stay employed for 25-30 years are seeing adequate returns to match the pension payment of those under OPS and the complaints of low payouts was only coming from those who have exited the scheme so far, having completed 20 years or less.
