pension scheme
The NPS offers high returns for those who stay invested for 25 to 30 years

Budget 2024: Government may assure guarantee under NPS

The Centre is likely to offer central government 50 per cent of their last pay drawn as pension, said a report

To allay the fears of central government employees and to counter Congress's demand to scrap the New Pension Scheme, the Centre seems to be leaning towards offering a guarantee of 50 per cent of the last pay drawn as pension.

The Centre may have ruled out the possibility of returning to the Old Pension Scheme (OPS) but they may give an assurance to central government employees who are part of the National Pension Scheme (NPS) that they will get 50 per cent of the last pay drawn as pension, said a report in the Times of India.

This assurance will come even after it has been established that the scheme offers high returns for those who stay invested for 25-30 years. But the Centre seems to want to keep a window open to provide a certain guarantee at a time when the Opposition Congress is pushing to replace the NPS, which was ironically introduced by the Congress-led Manmohan Singh government.

The former PM Manmohan Singh had also dubbed OPS as a fiscal millstone. During his term, he was the one to bring in the NPS terming it as a major fiscal reform whose wisdom would be recognised by future generations.


In April 2023, a high-powered committee headed by TV Somanathan to review the NPS for government employees was constituted. The committee was tasked to look into the issue of pensions under the NPS in respect to government employees and “evolve an approach which addresses the needs of the employees while maintaining fiscal prudence to protect the common citizens”.

OPS is a defined benefit scheme under which government employees get 50 per cent of their last drawn salary as pension. NPS, meanwhile, which came into effect on January 1, 2004, is a defined contribution scheme where a government employee provides 10 per cent of the basic salary as his or her contribution, while the Centre provides 14 per cent.

The Somnathan committee has conducted extensive calculations to work out the impact of offering an assured return. But, there is growing consensus that while the Centre can offer a guarantee of a 40-45 per cent return, this may not satisfy the concerns of employees who work for longer periods like 25 to 30 years. So, by offering a 50 per cent guarantee the government can also cover any shortfall that may occur, said reports.

According to officials, the complaints of shortfalls or low payouts only comes from those employees who put in just 20 years or less. While those who stay employed for 25-30 years are getting handsome payouts comparable to those under the OPS.

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