Govt May Assure 50% Of Last Pay As Pension Under NPS

Central government employees covered under the National Pension System (NPS) may soon be assured of receiving 50 per cent of their last drawn pay as a pension, according to a media report. This move is part of the government's effort to address concerns over payout disparities.

Finance Minister Nirmala Sitharaman announced the formation of a committee, chaired by Finance Secretary TV Somanathan, to explore this initiative. Although the government has ruled out a return to the Old Pension Scheme (OPS), it aims to provide greater security, especially as opposition parties advocate reversing the earlier decision.

The OPS guarantees a defined benefit of half of the last salary drawn as a lifelong pension, adjusted with Pay Commission recommendations. In contrast, the NPS is a defined contribution scheme where employees contribute 10 per cent of their basic salary, matched by a 14 percent contribution from the government.

The Somanathan committee has reviewed global practices and studied outcomes from state governments like Andhra Pradesh. It has conducted extensive assessments to estimate the impact of offering assured returns. The report suggests there is growing momentum within the government to guarantee 50 per cent of the last pay drawn for employees who serve 25-30 years, with the government bridging potential shortfalls.

Officials note that employees who remain invested for 25-30 years experience satisfactory returns comparable to OPS pensioners. Criticism about low payouts primarily comes from those who exit the scheme before completing 20 years.

To ensure financial sustainability, the government plans to create a dedicated fund similar to corporate retirement benefits. Discussions are ongoing to balance fiscal prudence with employee welfare under the evolving pension framework.