The Finance Ministry intends to unveil modifications to the National Pension Scheme (NPS) for government personnel by year-end. According to a senior government official, the government is contemplating the adoption of the Andhra Pradesh model, which guarantees a pension equivalent to 40–50% of the employee's last received basic pay. The proposed scheme will be tied to the market, with the government stepping in to cover any pension fund deficits. Employee contributions will remain unchanged, while the government's contribution will increase.
"The new scheme is scheduled for announcement by the end of the year. A committee is currently ironing out the scheme's details, primarily based on the Andhra Pradesh model. It will be market-linked, and the government will ensure that retirees receive 40–50% of their last basic salary," a senior official confirmed.
At present, employees allocate 10% of their basic salary to the NPS, while the government contributes 14% to the employees' NPS accounts. However, it remains uncertain whether the new scheme will be linked to inflation, similar to the Andhra model. This aspect is expected to be deliberated further by the committee, headed by the finance secretary, in their upcoming meeting.
Sources suggest that there is mounting pressure from BJP-governed states to amend the National Pension System and introduce a scheme reminiscent of the old pension system in a bid to appeal to voters ahead of elections. Some non-BJP-controlled states, such as Himachal Pradesh, Rajasthan, Chhattisgarh, Punjab, and Jharkhand, have already reverted to the old pension system, which places a heavier burden on states for pension payments.
Under Andhra's guaranteed pension scheme, pensioners receive 50% of their last basic salary, along with an inflation-linked dearness allowance (DA).
According to data from the Pension Fund Regulatory and Development Authority (PFRDA), which oversees the National Pension System (NPS), state and central government employees constitute 79% of the total assets under management in the NPS, totaling Rs 9 lakh crore. As of March 31, 2023, the number of subscribers to various NPS schemes was 6.3 crore, with state government employees accounting for 60.72 lakh and central government employees at 23.86 lakh.
Expected Modifications of NPS:
The government is contemplating the adoption of the Andhra Pradesh model for the New Pension System (NPS).
Employee contributions will remain unchanged, while the government's contribution will see an increase.
The Andhra Model assures a pension based on 40–50% of the employee's last recorded basic salary.
The proposed scheme will be linked to the market, but the government will cover any shortfalls in the pension fund.
Present contributions stay unchanged. The employees allocate 10% of their basic salary to the NPS, while the government contributes 14% to the employees' NPS accounts.