With some non-BJP ruled states deciding to revert to the old pension scheme, the Centre on Friday decided to set up a committee under the finance secretary to improve the New Pension System (NPS) to take care of the concerns of employees while maintaining fiscal prudence.

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While moving the Finance Bill 2023 for consideration and passage in the Lok Sabha, Finance Minister Nirmala Sitharaman said the new approach to the NPS will be designed for adoption by both central and state governments.

"I propose to set up a committee under the finance secretary to look into the issue of pensions and evolve an approach which addresses the needs of employees while maintaining fiscal prudence to protect common citizens," she said.

"The approach will be designed for adoption by both the central government and state governments."

The decision came in the backdrop of several non-BJP states deciding to revert to the DA-linked old pension scheme (OPS) and also employee organisations in some other states raising demand for the same.

The state governments of Rajasthan, Chhattisgarh, Jharkhand, Punjab and Himachal Pradesh have informed the Centre about their decision to revert to the old pension scheme and have requested a refund of the corpus accumulated under the NPS.

Maharashtra government employees agitating for the restoration of the OPS earlier this week called off a week-long strike after a meeting between their representatives and Chief Minister Eknath Shinde.

Earlier this month, the central government informed Parliament that it is not considering any proposal to restore the OPS in respect of the central government employees recruited after January 1, 2004.

Speaking on the announcement, Information and Broadcasting Minister Anurag Thakur said the committee will look at various suggestions on the NPS-OPS issue.

This is the right step which will keep in mind the benefit of employees as well as fiscal prudence, Thakur added.

Under the OPS, retired government employees received 50 per cent of their last drawn salary as monthly pensions. The amount keeps increasing with the hike in the DA rates. OPS is not fiscally sustainable as it is not contributory and the burden on the exchequer keeps on mounting.

The total assets under management under the National Pension System and Atal Pension Yojana stood at Rs 8.81 lakh crore as on March 4, 2023.

NPS has been implemented for all government employees except those in the armed forces joining the central government on or after January 1, 2004. Most of the state/ Union Territory governments have also notified the NPS of their new employees.

According to the PFRDA (Pension Fund Regulatory and Development Authority), 26 state governments, with the exception of Tamil Nadu and West Bengal, have notified and implemented NPS for their employees.

NPS has been made available to every Indian citizen from May 1, 2009, on a voluntary basis.

Further, on June 1, 2015, the Atal Pension Yojana was launched, which has given the much-required impetus to the social security schemes.

To regulate and develop the pension market, the government created PFRDA in 2003. It was initially designed for government employees exclusively, but its services were subsequently expanded to include all Indian nationals and NRIs, including self-employed persons.

PFRDA promotes, develops and regulates organised pension funds; namely the National Pension System (NPS) to serve the old age income needs of people on a sustainable basis.

With PTI Inputs