Big News for Employees : Interim Budget to Address Pension Concerns

The upcoming February 1st interim budget is expected to shed light on the National Pension System (NPS) and its potential adjustments, according to sources familiar with the matter. A committee led by Finance Secretary TV Somanathan, tasked with reviewing the scheme, is nearing its report submission deadline at the end of January.

While the panel has discussed potential tweaks and guarantees to the NPS, sources assure there's no intention to overburden the fiscal budget or revert to the old pension system. Public consultations are likely before any significant changes are implemented. The fine print is still being worked out, confided an official to the Economic Times. The report will focus on improving the NPS, addressing concerns raised by some pensioners who compare it to the old pension scheme.

The report, however, will avoid dictating specific changes. Any potential modifications, if deemed necessary, will be carefully weighed against their fiscal implications and subsequently presented for public feedback. The committee's formation dates back to April 2023, aiming to address pension concerns raised under the NPS for government employees. The group's mandate was to suggest improvements to NPS pension benefits while maintaining fiscal prudence, ET reported.

The NPS currently covers all central government employees joining after January 1, 2004, excluding the armed forces. Additionally, all state governments except Tamil Nadu and West Bengal have adopted and implemented the NPS for their employees, as per the Pension Fund Regulatory and Development Authority (PFRDA).

The debate surrounding the NPS intensified last year when several Congress-led states, like Rajasthan, Chhattisgarh, and Himachal Pradesh, opted to return to the traditional defined-benefit system, offering 50% of the last-drawn salary as monthly pension. In contrast, the NPS operates as a defined-contribution scheme, where employees accumulate a retirement corpus through contributions. Notably, Rajasthan and Chhattisgarh have since seen changes in government leadership, bringing BJP administrations to power.