New Delhi: The TV Somanathan panel, which was set up to explore ways of boosting pension under NPS without burdening the exchequer, has reportedly suggested up to 50 per cent assured pension under the National Pension System. If passed by Narendra Modi government 3.0, this could be a game-changer for central government employees.
If approved, assured pension under NPS is likely to offset the pressure from certain states to bring back the old pension system.
What is Andhra Pradesh NPS model?
The Andhra Pradesh state government worked out a formula to offer assured pension under NPS. Under this, any shortfall in pension drawn by the subscriber is supplemented by the Andhra Pradesh Guaranteed Pension System (APGPS) at up to 50 per cent of the last drawn pay.
APGPS also accounts for partial or final withdrawals while calculating the final pension payout. The pensioners are also entitled to dearness relief based on cost of living adjustment on last drawn pay, according to APGPS provisions.
If the deceased subscriber’s spouse faces a shortfall, the gap is supplemented through a top-up amount at 60 per cent of the guaranteed pension. According to the T V Somanathan panel recommendations, the Centre may provide 40-50 per cent of the last drawn salary as a guaranteed pension to central government employees.
The payout will be subject to the length of service and will also account for withdrawals, if any, during the scheme tenure. Pension shortfalls will be supplemented by the Centre’s provisions for the pay of central government employees.
What is the current pension provision under NPS
Under existing provisions, NPS requires central government employees to contribute 10 per cent of pay and the Centre is required to contribute 14 per cent of pay towards the scheme.
Out of this corpus, 40 per cent of the accumulated amount is invested in annuities. These annuities will generate a monthly pension. The remaining 60 per cent of the NPS corpus may be withdrawn by the retiree. This amount does not incur any taxes.
The Centre is likely to emulated the Andhra Pradesh government’s pension model to offer up to 50 per cent guaranteed pension under NPS. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
