{"id":34071,"date":"2023-03-25T02:47:16","date_gmt":"2023-03-24T21:17:16","guid":{"rendered":"https:\/\/vajiramandravi.com\/current-affairs\/?p=34071"},"modified":"2025-04-20T08:40:00","modified_gmt":"2025-04-20T03:10:00","slug":"union-government-forms-committee-to-look-into-new-pension-scheme","status":"publish","type":"post","link":"https:\/\/vajiramandravi.com\/current-affairs\/union-government-forms-committee-to-look-into-new-pension-scheme\/","title":{"rendered":"Union Government Forms Committee to Look into New Pension Scheme"},"content":{"rendered":"<h3><strong>What\u2019s in today\u2019s article?<\/strong><\/h3>\n<ul>\n<li><strong>Why in News?<\/strong><\/li>\n<li><strong>What is Old Pension Scheme (OPS)?<\/strong><\/li>\n<li><strong>What were the Concerns with the OPS?<\/strong><\/li>\n<li><strong>What is New Pension Scheme (NPS)?<\/strong><\/li>\n<li><strong>Difference between NPS and OPS<\/strong><\/li>\n<li><strong>News Summary<\/strong><\/li>\n<\/ul>\n<p><strong>\u00a0<\/strong><\/p>\n<h2><strong>Why in News?<\/strong><\/h2>\n<ul>\n<li>Union Finance Minister Shri Nirmala Sitharaman announced the formation of a committee to look into improving the system of pension for government employees.<\/li>\n<li>The move comes against the backdrop of at least five Opposition-ruled states adopting the Old Pension Scheme.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h2><strong>What is Old Pension Scheme (OPS)?<\/strong><\/h2>\n<ul>\n<li>OPS offers pensions to government employees on the basis of their last drawn salary. <i><strong>50% of the last drawn salary<\/strong><\/i>.<\/li>\n<li>The attraction of the Old Pension Scheme or \u2018OPS\u2019 lay in its promise of an assured or \u2018defined\u2019 benefit to the retiree. It was hence described as a \u2018<strong>Defined Benefit Scheme<\/strong>\u2019.<\/li>\n<li>To illustrate, <i><strong>if a government employee\u2019s basic monthly salary at the time of retirement was Rs 10,000, she would be assured of a pension of Rs 5,000<\/strong><\/i>.<\/li>\n<li>\u00a0Also, like the salaries of government employees, <u>the monthly pay-outs of pensioners also increased with hikes in dearness allowance or DA announced by the government for serving employees<\/u>.<\/li>\n<li>The <i><strong>OPS was discontinued by the Central government in 2003<\/strong><\/i>.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h2><strong>What were the Concerns with the OPS?<\/strong><\/h2>\n<ul>\n<li><strong>Fiscally unsustainable \u2013<\/strong>\n<ul>\n<li>The main problem was that the <i><strong>pension liability remained unfunded \u2014 that is, there was no corpus specifically for pension<\/strong><\/i>, which would grow continuously and could be dipped into for payments.<\/li>\n<li>The Government of India budget provided for pensions every year; there was no clear plan on how to pay year after year in the future.<\/li>\n<li>The \u2018pay-as-you-go\u2019 scheme created inter-generational equity issues \u2014 meaning the <i><strong>present generation had to bear the continuously rising burden of pensioners<\/strong><\/i>.<\/li>\n<li>According to <strong>Shri Jitendra Singh<\/strong>, Union Minister of State, Personnel, the number of people receiving central government pensions exceeds the number of active employees.\n<ul>\n<li>There are more pensioners, about 77 lakh, than active-duty personnel, which is about 50\u201360 lakh.<\/li>\n<li>He also stated that <i><strong>there are 6,000\u20137,000 pensioners who are &#8216;over 100 years old&#8217; and receive the same amount as a pension as they did as a salary<\/strong><\/i>.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<li><strong>Only benefits few people \u2013<\/strong>\n<ul>\n<li>Another criticism of OPS is that it costs the government a lot of money while only benefiting a few people.<\/li>\n<li>Under the scheme, <i><strong>only government employees, and only those who have worked for at least 20 years, are eligible<\/strong><\/i>.<\/li>\n<li>As a result, <i><strong>only 34 million (or less than 11%) of India&#8217;s estimated working population<\/strong><\/i> is eligible to participate in formal provisions designed to provide old-age income security.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h2><strong>What is New Pension Scheme (NPS)?<\/strong><\/h2>\n<ul>\n<li>As a substitute of OPS, the NPS was introduced by the Central government in <strong>April, 2004<\/strong>.<\/li>\n<li>This pension programme is open to employees from the <strong>public<\/strong>, <strong>private<\/strong> and even the <strong>unorganised<\/strong> <strong>sectors<\/strong> except those from the armed forces.<\/li>\n<li>The scheme encourages people to invest in a pension account at regular intervals during the course of their employment.<\/li>\n<li>After retirement, the subscribers can take out a certain percentage of the corpus.\n<ul>\n<li>The beneficiary receives the remaining amount as a monthly pension, post retirement.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Nodal agency:<\/strong> Pension Fund Regulatory and Development Authority (PFRDA)<\/li>\n<li><strong>Eligibility<\/strong><\/li>\n<li>Any Indian citizen <strong>between 18 and 60 years<\/strong> can join NPS.\n<ul>\n<li><strong>NRIs<\/strong> (Non-Residential Indians) are also eligible to apply for NPS.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Permanent Retirement Account Number (PRAN)<\/strong>\n<ul>\n<li>Every NPS subscriber is issued a card with <strong>12-digit unique number<\/strong> called Permanent Retirement Account Number or PRAN.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Minimum Contribution in NPS<\/strong>\n<ul>\n<li>The subscriber has to contribute a minimum of <strong>Rs. 6,000 in a financial year<\/strong>.<\/li>\n<li>If the subscriber fails to contribute the minimum amount, his\/her account is frozen by the PFRDA.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Who manages the money invested in NPS?<\/strong>\n<ul>\n<li>The <i><strong>money invested in NPS is managed by PFRDA-registered Pension Fund Managers<\/strong><\/i>.<\/li>\n<li>At the moment, there are eight pension fund managers.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h2><strong>Difference between NPS and OPS<\/strong><\/h2>\n<ul>\n<li>The Old Pension Scheme is a pension oriented scheme. It offers regular pensions to employees during retirement. The pension amount is 50% of the last drawn salary by the employee.\u00a0\n<ul>\n<li>Thus, in OPS, <strong>the pension amount is constant<\/strong>.<\/li>\n<\/ul>\n<\/li>\n<li>On the other hand, the <i><strong>NPS is a market-linked annuity product in which you invest a set amount on a regular basis during your working life and receive an annuity when you retire<\/strong><\/i>.\u00a0\n<ul>\n<li>NPS contributions are invested in market-linked securities, i.e., equity and debt instruments.<\/li>\n<li>Therefore, <strong>NPS doesn\u2019t guarantee returns<\/strong>.<\/li>\n<\/ul>\n<\/li>\n<li>However, <i><strong>the investments, in NPS, are volatile and hence they have the potential to generate significant returns<\/strong><\/i>.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h2><strong>News Summary<\/strong><\/h2>\n<ul>\n<li>Union Finance Minister Nirmala Sitharaman announced the formation of a committee to look into improving the New Pension Scheme (NPS).<\/li>\n<li>The committee, headed by <strong>Shri<\/strong> <strong>T V Somanathan<\/strong>, will work on an approach that will <i><strong>strike a balance between employees\u2019 needs and fiscal prudence, with any changes proposed to be adopted by both Central and State governments<\/strong><\/i>.<\/li>\n<li>The move to form such a committee comes as <strong>Himachal Pradesh<\/strong>, <strong>Punjab<\/strong>, <strong>Rajasthan<\/strong>, <strong>Chhattisgarh<\/strong> and <strong>Jharkhand<\/strong> have reverted to the Old Pension Scheme (OPS), which offers defined benefits.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<hr \/>\n<h3><strong>Q1) What is Pension Fund Regulatory and Development Authority?<\/strong><\/h3>\n<p>Pension Fund Regulatory and Development Authority is the regulatory body for overall supervision and regulation of pensions in India. It operates under the jurisdiction of Ministry of Finance.<\/p>\n<p>&nbsp;<\/p>\n<h3><strong>Q2)<\/strong> <strong>What is the retirement age for Central government employees in India?<\/strong><\/h3>\n<p>The retirement age for central government employees was last revised in May 1998, when it was moved up from 58 to <strong>60 years<\/strong>.<\/p>\n<p>&nbsp;<\/p>\n<hr \/>\n<p><strong>Source:<\/strong>\u00a0<a href=\"https:\/\/indianexpress.com\/article\/business\/old-vs-new-hotting-up-govt-forms-panel-to-relook-at-pension-8517629\/\" target=\"_blank\" rel=\"nofollow noopener\"><u>Old vs new hotting up, Govt forms panel to relook at pension<\/u><\/a>\u00a0|\u00a0<a href=\"https:\/\/timesofindia.indiatimes.com\/business\/india-business\/finance-secretary-led-panel-to-review-new-pension-scheme-says-nirmala-sitharaman\/articleshow\/98979269.cms\" target=\"_blank\" rel=\"nofollow noopener\"><u>ToI<\/u><\/a> \u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The New Pension Scheme was introduced by the Central government in 2004 to replace the Old Pension Scheme.<\/p>\n","protected":false},"author":5,"featured_media":34072,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[18],"tags":[],"class_list":{"0":"post-34071","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-upsc-mains-current-affairs","8":"no-featured-image-padding"},"acf":[],"_links":{"self":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/34071","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/comments?post=34071"}],"version-history":[{"count":0,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/34071\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media\/34072"}],"wp:attachment":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media?parent=34071"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/categories?post=34071"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/tags?post=34071"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}