Govt Mulls New NPS Model That Guarantees 40-50% Of An Employee’s Salary: Report

The new pension plan may replicate the Andhra Pradesh model, where the employees get guaranteed 40-50 per cent of their last drawn basic salary as a pension.

Outlook Money
November 3, 2023
New NPS Model

New NPS Model

The finance ministry is considering a new model for the National Pension System (NPS) by the year’s end. The New NPS Model will guarantee 40-50 per cent of the employee’s last drawn salary for pension, the New India Express reported, citing an unnamed official on Friday. 



The development comes amid a growing disgruntlement over NPS among pensioners demanding the restoration of the old pension system


As per the report, the Union government may adopt the Andhra Pradesh model, where the employees get guaranteed 40-50 per cent of their last drawn basic salary as pension. 


Under the proposed model, the government’s contribution will increase, but the employees can continue to contribute as before. Also, since it is a market-linked plan, the government would step in to fill any possible shortfall in the pension corpus if needed. 


A top official reportedly told the daily that the new plan will be announced by the year-end. 

In the NPS current model, the employees contribute 10 per cent of their basic salary while the government adds 14 per cent to the pension corpus. 


Andhra Pradesh Pension Model


According to the report, the ministry has formed a committee headed by the finance secretary to sort out the plan. However, it is not immediately clear whether it will be an inflation-linked plan.

The Andhra government offers an inflation-linked pension plan for employees who receive 50 per cent of their last drawn basic salary and dearness allowance (DA). 


In September, pensioners from across the country, representing various government departments, gathered in the Ramlila Maidan in Delhi to demand the reinstatement of the old system. The opposition-ruled states have already reinstated the old system, and now BJP-governed states have petitioned the centre to implement the same ahead of the general elections in 2024.


The Congress party has already turned it into a major election plank, and the BJP-rules states do not want to fall behind on the issue or give them an upper hand in wooing the voters.


As of March 31, 2023, there were reportedly 6.3 crore NPS subscribers, of which 60.72 lakh were state government employees and 23.86 lakh were central government employees. 

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