The Centre is likely to unveil a new pension model for its staff before the start of state assembly elections in November, guaranteeing a decent amount of pension under a workable formulation, a senior official said. The scheme will be jointly “funded” by the employees, and the guarantee could depend on actuarial analysis factoring in the longevity of retirees and their contributions.
Analysts believe that 35-40% guarantee would be feasible by tweaking the current structure of National Pension System (NPS), a nearly two-decade old scheme that is based on the concept of defined contribution.
A guarantee option of 50% of the last salary drawn could also not be ruled out, the source said, but it might involve substantial additional cost to the government and the employees.
Unlike the Old Pension Scheme (OPS) where benefits are defined and fully adjusted to inflation on an annual basis, the pension for the government staff under the proposed formula will adjust for inflation only every five or ten years, due to fund constraints, the source indicated.
“The government may announce pension guarantee for its staff by November,” he said. State elections for five states including Rajasthan, Madhya Pradesh, Chhattisgarh and Telangana are slated to be held in November-December.
However, the government might refrain from rolling out any new big-ticket schemes, ahead of the assembly and general elections, and instead would continue to focus on targeted interventions for the welfare of the lower strata of the population.
“We have not heard any discussion on any major new schemes. The government is instead focused on achieving saturation of existing welfare schemes and is undertaking some targeted interventions wherever the need is felt,” another official said.
In the last couple of months, the Centre has announced several interventions such as Rs 13,000-crore PM Vishwakarma scheme and the extension of free LPG connections to additional beneficiaries.
The government staff under NPS constitute a small part of the electorate with 8.7 million employed by the Centre and states.
The government’s move on guaranteed pension comes after many Opposition-ruled states luring voters by returning to the fiscally unsustainable OPS.
Sources said the top echelon of the government is seized of the matter a decision in this regard based on the recommendation of the Finance Secretary-led panel is expected before the upcoming assembly elections. Punjab, Rajasthan, Jharkhand and Chhattisgarh returned to OPS last year.
Under the non-contributory OPS (for pre-2004 staff), a government employee is entitled to 50% of her last salary as a pension if she has completed 33 years of uninterrupted service. Employees with uninterrupted service of more than 10 years and less than 33 years are entitled to pension on a pro-rata basis. Also, their pension gets inflation-adjusted twice a year.
According to extant NPS norms, a minimum of 40% of the accumulated NPS corpus from contributions during a person’s working years (the government and staff contribute 14% and 10% of pay, respectively) must be invested in annuities to generate a monthly pension, which is linked to annuity returns and not guaranteed. The balance of 60% can be withdrawn, which is tax-free. These features might undergo changes if the pension guaranteed options are given to the staff.