Unified Pension Scheme: an acceptable compromise for pensioners?

What’s the Unified Pension Scheme?

It’s a new hybrid pension scheme for presidency workers that, like OPS, ensures an assured month-to-month pension of fifty% of their final drawn wage earlier than superannuation whereas retaining the contributory factor of the NPS. The worker contributes 10% of their wage whereas the federal government places in 18.5%. It elements in inflation by means of dearness allowance hikes. It features a household pension and ensures a lump sum, aside from gratuity, at retirement. Staff with 10 years of expertise will get ₹10,000 per thirty days as assured pension. It takes impact on 1 April 2025.

What’s the distinction with NPS?

NPS was unpopular because the quantum of month-to-month pension was not assured. It depended totally on the returns the fund managers—regulated by the Pension Fund Regulatory and Growth Authority—make from investing the staff’ and the federal government’s contributions in fairness and different market-linked securities. Because the returns had been low, pensions below NPS had been decrease than what OPS provided. Additionally, NPS didn’t account for the dearness allowance hike consistent with inflation. When NPS got here into impact in April 2004, 27 states joined, however 5 of them have reverted to OPS lately.

Why did OPS must be reformed?

OPS was an unfunded pension scheme and was totally paid for by the federal government. As India aged and extra authorities workers retired, the expense grew to become unsustainable for a lot of states, weakening them financially and rising their debt. Research put OPS’ fiscal burden at 4.5 occasions NPS’. It took greater than a decade to construct bipartisan consensus and implement NPS.

Will UPS cease the shift to the previous scheme?

It ought to as NPS’ main ache factors have been addressed. This can make sure that the pension from OPS isn’t very completely different from that of UPS. Resentment towards NPS rose because the quantum of pension that it gave was a lot decrease than what pensioners received below OPS. Staff below NPS feared that if markets flip adversarial, they might not get any pension in any respect. Over time, political events started promising a return to OPS to win elections. To make certain, pension is a state topic and the Centre’s UPS is only a advice.

Will UPS enhance the Centre’s fiscal burden?

The associated fee might be greater than NPS however far decrease than OPS. The brand new scheme, the Centre says, “balances workers’ aspiration with fiscal prudence.” In comparison with NPS, the Centre’s contribution has elevated from 14% to 18.5% of an worker’s wage. It is going to additional enhance or lower relying on periodic actuarial assessments. If returns from investing workers’ corpus are much less, the Centre has to offer funds so the assured pension is paid. UPS is a setback to pension reforms as envisaged however is proffered as a center path.

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