Government Mulls 50% Last Pay as Pension for NPS Employees Amidst Concerns - In a bid to address concerns among central government employees enrolled in the National Pension System (NPS), the government is reportedly considering offering 50% of the last drawn pay as pension, according to a recent report.

Despite the NPS offering potentially high returns for employees who remain invested for 25-30 years, the government has set up a committee led by finance secretary T V Somanathan to explore solutions following an announcement by Finance Minister Nirmala Sitharaman.

While ruling out a return to the Old Pension Scheme (OPS), which guarantees half of the last salary as pension for life, the government aims to provide a level of assurance similar to OPS. Under NPS, employees contribute 10% of their basic salary, matched by a 14% contribution from the government.

The committee has analyzed global practices and studied the impact of similar adjustments made by the Andhra Pradesh government. Initial considerations suggested offering a 40-45% guarantee, but political considerations favor a 50% assurance to address long-term employee concerns effectively. This assurance implies that the government will cover any shortfall in pension payments.

To support this initiative, the government may establish a dedicated fund, akin to private sector retirement benefits, ensuring sustainable funding for future pension obligations. Officials highlight that employees staying invested for 25-30 years typically receive adequate returns comparable to OPS pensions, with dissatisfaction primarily voiced by those who exited the scheme prematurely.

The move underscores the government's commitment to balancing employee welfare with fiscal sustainability in pension management under the evolving NPS framework.

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