Key Points
- Finance Minister Nirmala Sitharaman has made it clear that the new Unified Pension Scheme (UPS) isn’t just a rollback of the National Pension System (NPS), but a whole new thing.
- The UPS will give a pension that’s 50% of an employee’s average basic pay from the last year before they retire, as long as they’ve worked for at least 25 years.
- Under the UPS, employees will chip in 10% of their basic salary and dearness allowance, while the government will put in 18.5%. That’s more than what’s required under the NPS.
- This new scheme is meant to be better for government employees than the NPS, which was linked to market returns and could be unpredictable in terms of pension payouts.
- Even though Congress is calling it a U-turn, Sitharaman says the UPS is a step up, addressing employee concerns rather than rolling back any changes.
- The UPS will be open to people already in the NPS and aims to fix some of the issues with the NPS that started back in 2004.
Looma News
Finance Minister Nirmala Sitharaman recently fired back at Congress for saying that the Unified Pension Scheme (UPS) was just a reversal of the National Pension System (NPS). Sitharaman insists that the UPS is a brand-new scheme meant to offer better benefits to government employees, setting it apart from both the old pension scheme (OPS) and the current NPS.
The UPS will provide a more reliable pension, offering 50% of an employee’s average basic pay from their last year of service, as long as they’ve been working for at least 25 years. If someone has less than 25 years, their pension will be proportional. Plus, there’s a guaranteed minimum of Rs 10,000 per month after just 10 years of service. This new scheme aims to fix some issues with the NPS, which ties pension payouts to market returns and has been criticized for being unpredictable.
With the UPS, employees will contribute 10% of their basic salary and dearness allowance, and the government will contribute 18.5%. That’s an increase from the NPS, where the government’s contribution was 14%. This change to a contributory system means employees will have more predictable benefits compared to the NPS’s market-linked payouts. The dissatisfaction with the NPS has led many states to go back to the OPS, which provided a fixed percentage of the last drawn pay as pension.
Even though Congress is saying the government is backtracking on pension reforms, Sitharaman argues that the UPS is a big improvement over the NPS and shows the government’s commitment to better serving its employees. The new scheme will benefit about 23 lakh central government employees and is seen as a strategic move to tackle pension issues ahead of upcoming state elections in Haryana and Jammu and Kashmir.
