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Central Government Employees

Unified Pension Scheme (UPS) to Provide Assured Pension, But Adds Financial Strain on Exchequer

Leave a Comment / By / Governance Community

The newly approved Unified Pension Scheme (UPS), set to be implemented from April 1, 2025, promises to provide an assured pension to 23 lakh eligible central government employees, adding an annual financial burden of Rs 6,250 crore on the exchequer. Under this scheme, the government’s contribution will rise from the current 14% to 18.5%, while employees’ contributions will remain unchanged at 10% of their basic salary. The UPS aims to address long-standing demands of government employees by offering a guaranteed minimum pension of Rs 10,000 per month for those with at least 10 years of service. Additionally, it ensures an assured family pension in case of a pensioner’s demise, with dearness relief linked to the All India Consumer Price Index for Industrial Workers (AICPI-IW). For employees retiring before March 31, 2025, under the National Pension System (NPS), a total arrear of Rs 800 crore will be provided if they choose to switch to the UPS. The scheme, recently approved by the Union Cabinet, is seen as a move ahead of upcoming assembly elections in states like Haryana and Jammu and Kashmir. The UPS allows employees under NPS to opt in, but once chosen, there is no option to revert. The pension payout will be linked to the corpus accumulated, unlike the NPS, which is solely contributory. Employees with a service length of 25 years will receive a pension amounting to 50% of their average basic pay over the last 12 months before retirement. For those with service periods between 10 to 25 years, the pension will be proportionate. This move comes amid demands from several states to revert to the Old Pension Scheme (OPS), which was linked to dearness allowance, in contrast to the NPS. Despite the shift to NPS since January 1, 2004, some states have been pushing for a rollback to OPS. Information and Broadcasting Minister Ashwini Vaishnaw highlighted that the UPS ensures dignity and financial security for government employees, aligning with the government’s commitment to their well-being and a secure future. The scheme represents a significant transformation of NPS, integrating features like dearness relief and fixed pension amounts. The approval of UPS follows a review by a committee set up by the finance ministry last year, tasked with recommending improvements to the NPS while balancing fiscal implications. The UPS is expected to reshape the pension landscape for central government employees, offering enhanced benefits while managing long-term fiscal sustainability. Source: Economics Times

Maharashtra Becomes First State to Implement Unified Pension Scheme for Employees

Leave a Comment / By / Governance Community

In a significant move ahead of upcoming elections, Maharashtra has become the first state to introduce the Unified Pension Scheme (UPS) for its employees, following demands from central government employee organizations for state governments to adopt the scheme. The decision came just 24 hours after the Union Cabinet approved the UPS, which offers 50% of an employee’s average salary from the last 12 months as pension, with inflation adjustments and additional benefits. The scheme is designed to address the demands of government employees who joined service in 2004 or later, offering a viable alternative to the Old Pension Scheme (OPS). While 23 lakh central government employees are set to benefit from the UPS, the number could rise to 90 lakh if all states implement the scheme. Top representatives of central government employees have urged states to adopt the UPS and avoid politicizing the issue. Although they consider OPS the best option since it did not require employee contributions, they expressed satisfaction with the new UPS, noting that it incorporates 90% of the OPS features. Shiv Gopal Mishra, of the All India Railwaymen’s Federation, emphasized the practicality of the UPS given the current economic scenario. The panel reviewing the National Pension System (NPS), led by Cabinet Secretary-designate T V Somanathan, highlighted that the UPS template can be replicated by states and would benefit over 99% of employees currently covered under NPS. JCM chief M Raghavaiah called for more states to implement the UPS and urged the government to reduce the service requirement for guaranteed pensions from 25 years to 20 years. He also suggested that the lump sum payment at retirement should be based on one-fourth of an employee’s monthly pay over the last six months. The scheme is expected to particularly benefit over eight lakh railway employees who have joined service in the past 20 years. Addressing concerns about political implications, a senior representative emphasized that the welfare of government employees should not be a partisan issue. Source: Al Jazeera

Pension Budget 2024 Expectations: FM May Offer Guarantee Under NPS; Central Government Employees Likely to Get 50% of Last Pay Drawn as Pension

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The government plans to provide 50% of the final pay drawn as pension for central government employees enrolled in the National Pension System (NPS). This effort addresses their worries about the pension payout, even though the current scheme offers attractive returns for those who remain invested for 25-30 years, especially for those recruited after 2004, according to a news report by Sidhartha in Times of India. A committee, led by Finance Secretary T V Somanathan, was formed after an announcement by Finance Minister Nirmala Sitharaman. Although the government has rejected a return to the Old Pension Scheme (OPS), it has left open the option to provide some level of reassurance. This comes amidst the Congress announcing a reversal of a decision made by the Manmohan Singh government. What is the Old Pension Scheme (OPS)? For the OPS scheme, government employees can receive half of their last drawn salary as a lifelong pension. This amount is subject to adjustments based on pay commission recommendations. The OPS ensures that government employees receive a guaranteed monthly pension upon retirement, provided they have completed at least ten years of service. This pension amount is calculated based on their last drawn basic salary and the total number of years in service. One of the key features of the OPS is that the government is responsible for paying the entire pension amount to the retired government employees. This means that during their years of service, no portion of the employees’ salaries is deducted towards their pension fund. This scheme offers financial security and stability to government employees after their retirement, allowing them to plan for their post-retirement life with confidence. On the other hand, the NPS scheme works differently, as it is a defined contribution plan. Under this scheme, government employees contribute 10% of their basic salary, and the Centre provides a 14% contribution. Pension: Budget 2024 Expectations The Somanathan committee has examined the international experience and studied the adjustments made by the Andhra Pradesh government. Additionally, extensive calculations have assessed the effects of guaranteeing a certain 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 acknowledgment within the govt of offering a 50% guarantee. Which means in case of a shortfall, the govt will fill the gap,” according to the Times of India news report. The committee members believe that an annual assessment must be carried out, as opposed to the government pension system, which is unfunded because the Centre lacks a retirement fund. The Centre will probably establish a fund this time in Budget 2024, similar to companies that provide retirement benefits to their employees. Officials have stated that individuals who remain employed for 25-30 years are experiencing satisfactory returns that align with the pension payments received by those under the OPS. They have noted that the grievances regarding low payouts primarily come from individuals who have left the scheme after completing 20 years or less. On January 11, 2024, in a memorandum, the Joint Forum for Restoration of Old Pension Scheme (NJCA), formed under the banner of the NJCA, urged the finance ministry to reinstate the non-contributory and guaranteed Old Pension Scheme instead of the contributory National Pension System for central government employees – including those in railways, defense, postal, income tax, accounts and audit, central secretariat, Isro, DAE, etc., as well as for autonomous bodies, paramilitary forces, and all state govt./Union territory employees, comprising primary teachers, high school and higher secondary teachers, and College and University Teachers, etc. The reinstatement applies to employees hired on or after January 1, 2004. The department of expenditure of the finance ministry responded to the demand for the Guaranteed Old Pension Scheme (OPS) to replace the existing National Pension System (NPS) for central government employees, as requested by the Joint Forum for Restoration of Old Pension Scheme (NJCA), “It is informed that the Committee formed under the Chairmanship of FS & SE to look into the issue of NPS has already had two rounds of detailed discussion with the Staff Side of National Council (JCM) and the valuable views of the NC (JCM) have already been noted by the Committee.”

Central Government Employees Anticipate 3% DA Hike as Inflation Soars

Leave a Comment / By / Human Resource Community

In the latest developments, a significant number of central government employees are eagerly awaiting the forthcoming Dearness Allowance (DA) hike. According to recent data and reports, there is a strong likelihood that the government will announce a 3 percent increase in the current DA rate, which currently stands at 42 percent. The surge in retail inflation in the country, reaching a 15-month high in July, has fuelled expectations for a 3 percent DA hike among employees. If this announcement materializes, it will elevate the DA for central government employees to 45 percent. While there hasn’t been an official confirmation regarding the specific date for the DA and Dearness Relief (DR) announcement, the latest reports indicate that the good news could arrive in September for both central government employees and pensioners. If confirmed, the DA hike will be retroactively effective from July 1, 2023. The Central government makes announcements regarding DA and DR adjustments twice a year, catering to central employees and pensioners. This allowance is crucial in mitigating the effects of inflation. The computation of the DA amount relies on the most recent data from the Consumer Price Index for Industrial Workers (CPI-IW), in accordance with the guidelines established by the 7th Pay Commission. The DA and DR benefits extend to over 1 crore central government employees and pensioners at present. With the earlier hike of 4 percent implemented in January of this year, the DA rate escalated from 38 percent to its current level of 42 percent.