The Finance Ministry has announced setting up of a committee under the chairmanship of the Finance Secretary to improve the New Pension Scheme. The Committee will have Secretary, Ministry of Personnel, Public Grievances and Pensions, Special Secretary, Department of Expenditure and Chairman, Pension Fund Regulatory and Development Authority as members.
The Finance Ministry has announced setting up of a committee headed by the Finance Secretary to reform the New Pension Scheme (NPS). The committee will have Secretary, Ministry of Personnel, Public Grievances and Pensions, Special Secretary, Department of Expenditure and Chairman, Pension Fund Regulatory and Development Authority (PFRDA) as members.
Finance Minister Nirmala Sitharaman had announced the setting up of the committee in the Lok Sabha last day, the implementation of which has been announced on Thursday. The committee has been asked to recommend changes in the context of the existing framework and structure of the New Pension Scheme.
The committee has been asked to suggest ways to make pension benefits more attractive under the new pension scheme. But it has been asked to take care that its suggestions should not have any adverse effect on the interests of the general public and budgetary discipline.
Remarkable thing is that nothing has been said about when the committee will report. The committee will give its recommendations after talking to the states. Be aware that the issue of pension has become an important political issue in the last few years. The old pension scheme is believed to have played a major role in the victory of the Congress in Himachal Pradesh.
Although economists are calling the old pension scheme (OPS) impractical and dangerous from the point of view of the economy, but the political arrow of the Congress in Chhattisgarh and Rajasthan to cancel the new pension scheme and restore the old pension scheme in its place has gone.
The Aam Aadmi Party government in Punjab has also taken a similar step. In Maharashtra Government, Deputy Chief Minister Devendra Fadnavis has said that the pension system is being considered. Political pressure is becoming such that almost all the states are talking about some or the other change.
It is believed that in the general elections of the year 2024, emphasis will be laid on the promise of the Congress to cancel the existing new pension scheme and replace it with the old pension system.
Seeing this growing political fervor, a committee has been constituted by the Finance Minister to make changes in the existing NPS applicable to government employees. It is believed that the committee will consult the states and their views can be taken in writing. Looking at the economy, he can also be asked that if OPS is implemented then what will be its roadmap.
Old Pension Scheme
In the earlier system, it was guaranteed that the employee would get pension after retirement. So the employee did not have to worry about saving for expenses after retirement.
- No deduction from salary for monthly pension.
- General Provident Fund (GPF) facility.
- At the time of retirement, the employee gets pension up to 50 percent of the last basic salary.
- Full pension will be given even if the employee takes voluntary retirement.
- The facility of increase in dearness allowance payable by the government and the reforms of Pay Commission implemented.
- GPF interest is exempt from income tax upon retirement.
- Provision of 40 percent pension computation
New pension scheme
The amount deducted under this scheme is invested in the equity market and government securities. The rally in the equity market favors NPS in the long term, but there is also the possibility of short term volatility.
- Deduction of 10 percent from salary per month for pension.
- Employer’s contribution up to 14 per cent.
- No facility of General Provident Fund.
- No guaranteed pension at the time of retirement.
- Provision to give 20 percent cash and 80 percent amount on pension on voluntary retirement.
- The money received on retirement will have to be taxed.
- No provision for pension computation.
