Centre may guarantee 50% of last pay as pension under NPS: Report

Criticism about low payouts primarily arises from those who have exited the scheme before completing 20 years.

Central government employees covered under the National Pension System (NPS) may soon be assured of 50 percent of their last drawn pay as pension, as the government works towards addressing concerns over payout disparities, according to a report by The Times of India.

Finance Minister Nirmala Sitharaman's announcement led to the formation of a committee chaired by Finance Secretary TV Somanathan to explore this initiative. Despite ruling out a return to the Old Pension Scheme (OPS), the government aims to provide a level of comfort, especially as opposition parties pitch for reversing the earlier decision.

The OPS guarantees a defined benefit of half of the last salary drawn as lifelong pension, adjusted with the Pay Commission recommendations. In contrast, the NPS is a defined contribution scheme where employees contribute 10 percent of their basic salary, matched by a 14 percent contribution from the government.

The Somanathan committee has reviewed global practices and studied outcomes from adjustments made by state governments like Andhra Pradesh. It has conducted extensive assessments to estimate the impact of offering assured returns. The TOI report added that there is a growing momentum within the government to guarantee 50 percent of the last pay drawn for employees who serve 25-30 years, bridging potential shortfalls with government funding.

Officials contend that employees who remain invested for 25-30 years are experiencing satisfactory returns comparable to OPS pensioners. Criticism about low payouts primarily arises from those who have exited the scheme before completing 20 years.

The government is planning to create a dedicated fund akin to corporate retirement benefits to ensure financial sustainability. Discussions are ongoing, aiming to balance fiscal prudence with employee welfare under the evolving pension framework.