Govt may opt for AP model on PF
Some of the states ruled by opposition parties have already gone back to the old pension system and there have been demands the old pension system be readapted
The debate on old pension system and the NPS is going on. Some of the states ruled by opposition parties have already gone back to the old pension system and there have been demands the old pension system be readapted.
Keeping this in mind it there are reports that the government may follow the Andhra Pradesh model of pension.
The English newspaper New Indian Express has quoted sources as saying that by making changes in the New Pension Scheme, the central government can arrange pension on the basis of the Andhra Pradesh model for the pension of government employees.
It has been said in the report that in the new system of the NPS, on retirement of the employee, there can be a provision of pension equal to 40-50 percent of his last monthly salary. The government has constituted a committee under the chairmanship of Union Finance Secretary TV Somanathan to suggest changes in the new pension scheme.
It has also been told in the report quoting sources that the new pension scheme coming after the change will be market linked and if the returns of the market fail to pay the pension in full, the government will compensate it and ensure that the pensioner gets a pension equal to 40-50 percent of his last monthly salary. For this, the contribution of the employees will remain the same as before. There will be no increase in it while the government will increase its contribution. In the current system of the New Pension Scheme, the employee has to contribute 10 percent of his basic salary for pension and the government contributes equal to 14 percent of the basic salary.
However, it is not yet clear whether the pension scheme coming after the change will be linked to inflation or not. However, the pension scheme of Andhra Pradesh is linked to inflation and pension increases on the lines of changes in inflation. In the pension scheme of Andhra Pradesh, there is a provision of pension equal to 50 percent of the employees’ last salary.
While speaking to Money9, the Pension Fund Regulatory and Development Authority (PFRDA) chairman Deepak Mohanty said introducing guaranteed pension is not on PFRDA’s radar. Mohanty, instead, advocated multiple options to be made available to citizens, so that they can consolidate their twilight year finances via one such single scheme, or through a combination of them all.
“Even though in absolute terms, our pension corpus is a sizable Rs 9.58 lakh crore, it only makes up about 3% of GDP. If we add up all our pension assets, including pension from APY, EPF and others, it does not cross 16% of GDP,” he noted.