Centre notifies committee on pension schemes for govt employees

According to a memorandum, the panel will comprise Somanathan, secretary of Department of Personnel & Training; Radha Chauhan, special secretary in Finance Ministry’s Expenditure Department; Annie Matthew, and Deepak Mohanty, chairman of Pension Fund Regulatory and Development Authority.

The panel will deliberate on whether any changes are required to the National Pension System, and suggest the measures which will improve pensionary benefits for government employees while maintain fiscal prudence for the exchequer. The panel will devise its own procedure and mechanism, including consulting with the states, to arrive at its recommendations.

Finance Minister Nirmala Sitharaman had said last month in Lok Sabha that a committee will be set up under Somanathan to look into the pension issues of government employees. “I propose to set up a committee under the Finance Secretary to look into the issue of pensions and evolve an approach which addresses the needs of employees while maintaining fiscal prudence to protect common citizens,” Sitharaman had said while speaking on the Finance Bill.

“The approach will be designed for adoption by both the central government and state governments,” she had said.

The move comes in the backdrop of several non-BJP states deciding to revert to the dearness allowance-linked Old Pension Scheme (OPS) and also employee organisations in some other states raising demand for the same.

The state governments of Rajasthan, Chhattisgarh, Jharkhand, Punjab and Himachal Pradesh have informed the Centre about their decision to revert to the Old Pension Scheme and have requested a refund of corpus accumulated under the NPS.

The OPS offers fixed pensions to employees after retirement. The pension amount is 50 percent of their last drawn salary. NPS, meanwhile is an investment cum pension scheme. NPS contributions are invested in securities like debt and equity instruments. Thus, it does not guarantee fixed pensions but provides high returns in the long term, resulting in a significant lump sum and monthly pensions.

The centre has been allowing states to increase their borrowing limits by the same amount as which they are annually contributing to new NPS accounts for their state government employees. Those states reverting to OPS will not get that much extra borrowing room.