NPS committee update to be present during Interim Budget 2024

The upcoming interim budget scheduled for February 1 is anticipated to provide insights into the current status of the National Pension System (NPS), as reported by sources familiar with the matter in the media.

A committee led by Finance Secretary TV Somanathan, tasked with reviewing the NPS, is expected to submit its report by the end of this month.

According to reports in the media, the committee has explored potential adjustments and assurances during discussions but is reportedly not inclined to increase fiscal burdens or revert to the previous pension scheme.

There's a possibility that the government might seek public opinions before finalizing any decisions. "The details are being finalized," remarked one official quoted in the media report.

The committee’s report aims to address concerns raised by some pensioners in comparison to the old pension scheme (OPS). It will not prescribe specific changes; instead, any proposed alterations will be carefully evaluated considering fiscal implications before seeking public input.

The OPS vs NPS debate has gained prominence. The committee, established last April, was tasked with examining pension-related issues within the NPS for government employees, aiming to improve pension benefits while considering fiscal responsibilities.

The NPS has been applicable to all central government employees joining on or after January 1, 2004, except those in the armed forces.

According to the Pension Fund Regulatory and Development Authority (PFRDA), all states, except Tamil Nadu and West Bengal, have implemented the NPS for their employees.

The discussion around the NPS escalated when certain Congress-governed states reverted to the old defined benefit system last year, offering government employees 50% of their last-drawn salary as a monthly pension. In contrast, the NPS operates as a defined contribution scheme, accumulating a retirement corpus for employees.

Opposition parties argue that state government employees shouldn't be subjected to market fluctuations, given that NPS funds are invested in the equity market. States reverting to the OPS also demanded a refund of the accumulated corpus under the NPS, a request rejected by the Centre citing existing laws.

The Centre argues that the old pension scheme is financially unsustainable, prompting its discontinuation. However, the Reserve Bank of India (RBI) and various economists oppose the restoration of the OPS, asserting that it would disturb the fiscal balance of the states.

In response to queries in the Rajya Sabha, the government clarified last month that there is currently no proposal under consideration to restore the OPS for central government employees.