Hybrid Pension Scheme likely to be proposed by the NPS review panel

A panel appointed by the Central government is looking into pension schemes for government employees at both the central and state levels. The panel is likely to recommend that states be allowed to adopt a hybrid pension scheme similar to the one implemented by the Andhra Pradesh government. This recommendation comes in response to several states, run by opposition parties, reverting back to the Old Pension Scheme (OPS).

The panel's report is expected to be presented to Finance Minister Nirmala Sitharaman in July. It is likely to propose a scheme called the Guaranteed Pension Scheme, which incorporates elements of both the OPS and the New Pension Scheme (NPS). The committee has been closely examining this hybrid model, aiming to recommend a scheme that combines the best features of both existing schemes.

If the recommendation is accepted, the Central Government may propose implementing the Guaranteed Pension Scheme and offer fiscal incentives, such as allowing states to borrow more money from bond markets. However, concerns remain about the potential impact on states' budget deficit targets.

The OPS scheme provides fixed pensions to retired employees, while the NPS scheme operates as an investment-cum-pension scheme. The NPS contributions are invested in securities, offering better long-term returns but without a guarantee of fixed pensions.

Recently, Andhra Pradesh approved the Guaranteed Pension Scheme, which provides a guaranteed pension of 50% of an employee's last drawn basic pay without any deductions upon retirement. Several states, including Rajasthan, Chhattisgarh, Jharkhand, Punjab, and Himachal Pradesh, have expressed their intention to switch to the OPS and have also requested a refund of the accumulated corpus under the National Pension System (NPS).