7th Pay Commission: All central government employees, barring those in armed forces, who joined respective services after April 2004 are covered under the New Pension System (NPS) as the Centre scrapped the Old Pension Scheme (OPS) as part of pension reforms 20 years back. Since then demands have continuously been raised by different central and state government employees unions to restore the old system. Those who joined any central government service before 2004 are still covered under the Old Pension Scheme, thus drawing guaranteed pension.
50% of last-drawn salary likely as guaranteed pension
The Centre has many times in the past said that there is no question of going back to the old system. But, now it is reportedly considering guaranteeing 50% of the last-drawn salary as pension for central government employees under the National Pension System.
According to a report by The Times of India, the government is likely to take this step in view of payout disparities between the Old Pension Scheme and the New Pension System.
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A committee led by Finance Secretary T V Somanathan was entrusted with this responsibility of looking into the various aspects of the demand seeking return to the OPS and submitting the report to the government. Under the OPS, central government employees receive a lifelong pension of 50% of their last-drawn salary, adjusted with Pay Commission recommendations.
Why are central government employees demanding OPS restoration?
There have been allegations and complaints from several employee organisations regarding the new pension scheme. They are claiming that having two pension systems has not only created income disparity for employees retiring from the same organisation and having served same number of years, but also is a blatant discrimination between two sets of employees working together. These employees are also against the NPS on the ground that the new system decreases their take-home salary by 10%.
In a bid to pressurize the Centre over the issue, there have been calls from various quarters associated with the central government employees to restore the OPS. Recently, the All India Railwaymen’s Federation (AIRF) wrote to the Centre, demanding the restoration of the old pension system.
The letter said, “…more than 20 lakh civilian central government employees are governed under the National Pension System and every month they have to contribute 10% of their basic pay and DA to the NPS. This considerably reduce their take home pay. The government has so far not agreed to our demand to scrap NPS and to restore the pension under CCS (Pension) Rules, 1972 (now 2021) to the central government employees recruited on or after 1st January, 2004.”
7th Pay Commission: What are other key demands of employees?
The Centre implements new pay commission recommendations usually every 10 years and the last pay commission was set up in 2014 and its recommendations came into effect from January 2016. Now, the expectations are high that the Modi government will soon announce setting up the 8th Pay Commission as Lok Sabha polls are over and the ruling BJP has managed to form its government supported by some allies.
Old pension system key benefits:
Under OPS, central government employees are given a pension based on a fixed formula. Their pension is equal to 50% of their last-drawn salary. These employees also get the benefit of biannual revision in Dearness Relief (DR).
How is OPS different from NPS?
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Under NPS, government employees contribute 10% of their basic salary plus DA, while the government contributes 14% of the basic salary plus DA every month.
The NPS was initially launched for the government sector employees, but in 2009, the scope of NPS was extended further to include all citizens, including self-employed and unorganised workers. This pension scheme allows citizens to contribute a monthly amount until the age of 60 and receive a pension after retirement.