The Centre has made an upfront provision of Rs 7,000 crore in the Budget for the next financial year and may top it up with another Rs 1,500 crore after an assessment of the contribution required for assured 50% of the pay as pension for its staff under the Unified Pension Scheme (UPS), sources told FE.
Under the UPS to be effective from April 1, the employee contribution shall remain unchanged at 10% (of Basic Pay + Dearness Relief).
The government’s contribution will increase from the extant 14% (under the market-linked National Pension System or NPS) to 18.5%, which factors in the past deficit of contribution for staff already enrolled in the contributory pensions scheme.
Those who have already retired under NPS will also be eligible for this benefit.
Arrears will be paid to such past retirees after adjusting the withdrawals already made by them.
An official said the government’s provisioning of Rs 7,000 crore additional contribution for the staff under NPS (UPS from April 1) highlights that the Centre is taking on board the commitments arising therefrom.
While it is difficult to assess now, the preliminary estimate suggests further Rs 1,000-1,500 crore may be required next year, the official added.
The Centre’s annual contribution on a 14% contribution basis was Rs 12,917 crore in FY21 and Rs 17,297 crore in FY24.
The cost to the government due to the increase in the contribution rate to 18.5% will continue to rise each year based on the salary bill.
The salary bill would rise due to annual increments and new recruitments.
The UPS will be manageable despite giving the guaranteed pension without putting too much fiscal burden like in the previous non-contributory old pension system (OPS), sources said
The UPS will have many of the features of the OPS though.
It will provide an assured pension of 50% of the last drawn salary (average basic pay of last 12 months of service) upon superannuation for all employees completing a minimum of 25 years of service, with the value of such deferred compensation fully indexed to inflation.
Besides, there will be assured payouts to the spouse of the pensioner after his/her demise at 60% of the last pension drawn.
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