Panel weighing pension guarantee under National Pension System
The Finance Secretary-led committee on the National Pension System (NPS), set up by the government to suggest ways to increase pensionary benefits under NPS amid the move by some states to return to the unsustainable Old Pension Scheme (OPS), may suggest ways to address the demand for a guaranteed pension under the NPS for the government staff at a decent level, without burdening the exchequer too much.
While the level of guarantee, if so suggested, could depend on actuarial analysis factoring in the longevity of retirees and contributions, analysts believe that 35-40% could be feasible by tweaking the current structure of NPS. But, the cost for such guarantee could be shared by employees.
In recent interactions with the committee, the government employee unions have flagged two main issues: There is no guaranteed level of pension in NPS as it is based on market returns and the pension received by some retirees under NPS was paltry.
Officials have refuted the claim by the unions that pension is low under NPS as the example cited by them was that of lateral entrants who retired after serving a few years in service. Hence, these were not comparable with people serving for the usual career span of 33 years or more.
“Unless the government finds a way to price the guarantee and charge for it, there should not be a declaration of a guarantee. The guarantee scheme could be provided as an option, and those who wish to purchase it should be free to do so,” said Renuka Sane, the research director at TrustBridge.
Under the OPS (for pre-2004 staff), a government employee is entitled to 50% of her last salary as a pension if she has completed 33 years of uninterrupted service. Employees with uninterrupted service of more than 10
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