Union Finance Minister Nirmala Sitharaman on Friday said that there is a need to see if current pensioners are being paid by putting a burden on future. With current pensioners, she was hinting at National Pension System (NPS). This statement comes at a time when some state government are restoring to the old pension scheme (OPS).
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FM was speaking in an exclusive interview with Rahul Joshi, Editor-In-Chief of Network18 after making Budget 2023 announcements on Wednesday.
"New Pension Scheme came in Congress's period," FM said.
Last month, Himachal Pradesh became the fourth state to revert to the OPS for state government employees. Chhattisgarh, Rajasthan and Punjab, too, have rolled out OPS.
Recently, Reserve Bank of India (RBI) advised states against OPS. In its latest report on state finances, the central bank said that the major risk looming large on the subnational fiscal horizon is the likely reversion to the OPS by some states.
In November 2022, Former NITI Aayog Chairman Arvind Panagariya also said that states would not be able to afford the financial burden of OPS. According to Indian Express report, he said that any state can't afford to do that because the liability will be very large.
"They will have to finance it from the tax revenue. But there are no tax revenues," he was quoted as saying in the report.
About old pension scheme
In the old pension regime, pension was 50 percent of the last drawn salary of the employee and the entire amount was paid by the government.
How is it different from the current one?
The old pension scheme was discontinued on April 1, 2004, and replaced with the National Pension Scheme (NPS). NPS, a government-run investment scheme, gives the subscriber the option to set the preferred allocation to different asset classes. The returns in NPS are not guaranteed and depend on the performance of the asset allocation by the subscriber based on his/her risk-taking capability during the employment tenure.
Under this scheme, the employees contribute 10 percent of their salary towards pension, and the state government contributes 14 percent. The amount is then deposited with Pension Fund Regulatory and Development Authority (PFRDA), where it is invested.