State government replaces NPS with sweeter revised pension scheme
Maharashtra's Mahayuti government approved the Unified Pension Scheme for 8.3 lakh employees, effective March 2024, offering 50% basic pay as assured pension.
MUMBAI: Within 24 hours of the union government’s approval of the Unified Pension Scheme (UPS) to replace the New Pension Scheme (NPS) for its employees, the Mahayuti government approved the UPS for around 8.3 lakh employees in a cabinet meeting on Sunday. These employees will get the benefit of the scheme from March 2024, and will get an assured 50% of their basic pay and dearness allowance as pension.
Around 1.4 million government and semi-government employees, including Class 1 officers, Class 4 employees and teachers, had threatened to go on an indefinite strike from August 29 to press their demand for a notification on the revised pension scheme that was announced by chief minister Eknath Shinde in March 2024. However, even after its announcement, the Federation of Government Officers and Employees has reacted with caution. “Out of 1.4 million officers and employees, around 8.3 lakh come under the NPS, as they joined service after November 1, 2005,” said Vinod Desai, president of the Maharashtra State Gazetted Officers Federation. “We will examine the details of the revised pension policy and then decide our stand.”
While explaining the prospective revised pension scheme to the cabinet, a finance department official said, “We are proposing a pension scheme similar to the one the union government approved for its employees.” Apart from 50% of basic salary and dearness allowance, state government employees will be entitled to family pension, under which the next of kin of the retired employee will get 60% of the pension amount along with dearness allowance.
The government note says that to get the benefit of the revised pension scheme, all concerned employees will have to “select” this new pension option. While counting the years of service for this scheme, the state government will consider the actual period of contribution by an employee. If the employee is in service but failed to contribute for a certain period, that period will not be considered while computing the pension. However, if the employee later credits the amount with 10% interest, the period will be considered valid.
As per the information given by the finance department while announcing the revised pension scheme in March 2024, the government currently spends around ₹53,000 crore per year on the OPS and ₹7,686 crore per year on the NPS.
NPS versus OPS
What is the row about the NPS and why are government employees demanding a revised pension scheme?
* In the OPS, there was no contribution from government employees, and they were entitled to an assured pension in the form of 50% of their last basic pay and dearness allowance.
*To reduce the financial burden of pension on the exchequer, the central government in 2004 decided to shut the OPS and introduced the NPS. Accordingly from November 1, 2005, the Maharashtra government enforced the NPS, and all employees who had joined after November 1, 2005 came under this scheme.
*In the NPS, employees do not get an assured pension, as it is market-linked. They have to contribute 10% of their basic salary and the state government gives 14% of the basic salary as its contribution. This 24% goes towards the pension fund of employees, and fund managers like SBI and LIC invest it in the market. After retirement, employees get a market-linked pension.
*As there is no assured pension in the NPS, state government employees were opposing it and demanding a revised scheme with an assured pension.