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Old Pension Scheme

Maharashtra Becomes First State to Implement Unified Pension Scheme for Employees

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

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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.”

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Karnataka Government Honors Commitment, Implements Old Pension Scheme for 13,000 Employees

In a significant move, the Karnataka government has officially announced the implementation of the Old Pension Scheme for approximately 13,000 state government employees who were recruited after 2006. This decision comes as a fulfillment of Chief Minister Siddaramaiah’s commitment made during a strike by government employees opposing the introduction of the new pension scheme. 2006 ಏಪ್ರಿಲ್‌ ಪೂರ್ವ ನೇಮಕಾತಿ ಅಧಿಸೂಚನೆಯಾಗಿ 2006 ರ ನಂತರ ನೇಮಕಾತಿಗೊಂಡ ರಾಜ್ಯ ಸರ್ಕಾರದ ಸುಮಾರು 13,000 ಸರ್ಕಾರಿ ನೌಕರರಿಗೆ ಹಳೆ ಪಿಂಚಣಿ ಯೋಜನೆ ವ್ಯಾಪ್ತಿಗೆ ಒಳಪಡಿಸಿ ಆದೇಶ ಹೊರಡಿಸಲಾಗಿದೆ. ಚುನಾವಣೆಗೂ ಪೂರ್ವದಲ್ಲಿ ಎನ್.ಪಿ.ಎಸ್ ನೌಕರರು ಮುಷ್ಕರು ಮಾಡುವ ವೇಳೆ ಸ್ಥಳಕ್ಕೆ ಭೇಟಿನೀಡಿ ನಾವು ಅಧಿಕಾರಕ್ಕೆ ಬಂದ ನಂತರ ಬೇಡಿಕೆ… pic.twitter.com/IJTzZACw2R — Siddaramaiah (@siddaramaiah) January 24, 2024 Chief Minister Siddaramaiah affirmed the government’s dedication to meeting the demand of the employees, stating, “An order has been issued to cover the old pension scheme to about 13,000 government employees of the state government recruited after 2006. Even before the election, I visited the place when the National Pension System (NPS) employees were on strike and promised to fulfill the demand after we came to power.” He expressed hope that the decision brings comfort to the families of the 13,000 NPS employees affected by the transition. Old Pension Scheme vs. New Pension Scheme The Old Pension Scheme guarantees a monthly pension post-retirement, usually amounting to half of the last drawn salary, providing financial security for retired government employees. In contrast, the New Pension Scheme involves employees contributing a portion of their salaries to a pension fund, leading to a one-time lump sum payment upon superannuation. The transition from the old to the new scheme occurred in December 2003, with the new scheme being implemented on April 1, 2004. Taking the opportunity to address broader issues, Chief Minister Siddaramaiah criticized the central government, accusing it of failing to deliver on its promise of creating two crore jobs per year. “Prime Minister Narendra Modi, who promised to create 2 crore jobs per year, failed to do so. 20 crore jobs were to be provided in ten years, which did not happen,” he remarked. These comments were made during the inauguration of a project aimed at rejuvenating 150 lakes and ponds in 79 villages in Periyapatna taluk from the Cauvery River at Muthtina Mullusoge on Wednesday, January 24.

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