The newly announced Unified Pension Scheme (UPS) is not a rollback of the National Pension System (NPS), rather an improvement designed to address certain challenges while retaining its core benefits, Finance Minister Nirmala Sitharaman said.
"Unified Pension Scheme is not a rollback of NPS because it’s different. UPS is improvising NPS. UPS is a new package," she said at a press briefing.
The finance minister emphasised that the UPS aims to enhance employee satisfaction by offering an assured pension that makes it different from the NPS, which is a market-linked, defined contribution plan. She pointed out that the UPS is an evolved model, addressing some of the concerns associated with the Old Pension Scheme (OPS), which has been criticised for its fiscal burden on state governments.
"Challenges of OPS are known," Sitharaman said, acknowledging the drawbacks of reverting to the OPS. She further highlighted that the UPS is designed to maintain the logical framework of pension reforms while offering flexibility to states. "We have not gone back to OPS. A U-turn is when we go back to the old position. Keeping the logical framework intact, we are giving them options," she said, making it clear that the UPS is a forward-looking approach, instead of being a reversal.
In response to whether the government plans to hold discussions on the UPS on states, Sitharaman asserted that the scheme would not be imposed upon state governments. However, she noted that the Centre is open to discussions if any state expresses interest in adopting the scheme. "We will not impose the Unified Pension Scheme on states. If some states request, the Centre may hold discussions with them."
Sitharaman hopes that the opposition-ruled states, some of which have reverted to the OPS, might eventually see the merits of the UPS and choose to adopt it. "Under the UPS, employees will get an assured pension, it will increase employee satisfaction. Opposition states will likely see its merits and adopt it," she said.
The Unified Pension Scheme, as outlined by the finance minister, represents a significant development in India’s pension policy, potentially setting the stage for a broader consensus on the future of pension reforms in the country.
The Union Cabinet on August 24 approved the Unified Pension Scheme, combining the benefits of its earlier Old Pension Scheme and the facets of the New Pension Scheme. The new scheme, applicable from the next fiscal, guarantees 50 percent of the last 12-month drawn salary to central government employees as pension, along with the benefits of inflation-linked hikes post-retirement for employees serving the full tenure of over 25 years.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
