Omkar Dattatray
The pension schemes and pensioners have rightly become the talk of the town as pensioners; government employees and even general populace are discussing the hot topic of pension schemes and the plight of the pensioners. Just a few days back, the central government has launched the unified Pension Scheme {UPS} as an alternative to the current National Pension Scheme {NPS] for its employees. Scheduled for implementation in April 2025,this new scheme presents a significant choice for employees who joined after 2004. Should they remain with NPS or transition to the new UPS? Detailed Comparison between the two Pension schemes follows. The National Pension Scheme -NPS was introduced in 2004 as a defined contribution scheme, replacing the old pension scheme-OPS .Under NPS, employees contribute 10% of their salary ,while government contributes 14%. The corpus is invested in a mix of government securities, equities , and corporate bonds, similar to mutual funds. Upon retirement, 40% of the corpus must be used to purchase an annuity .The Unified Pension Scheme -UPS ,on the other hand, offers a guaranteed pension of 50% of the average pay for the last 12 months for employees who have served for 25 years or more . The governments contribution under UPS is set at 18.5% ,with the employees contribution remaining at 10%.Additrionally ,UPS includes a minimum monthly payment for those who have worked for at least for 10 years, along with a lump sum retirement benefit .The UPS offers a more secure retirement plan with guaranteed benefits. Under UPS ,employees with at least 25 years of service will receive a guaranteed pension of 50% of their average basic pay .
In case of an employee’s death, their spouse will receive a family pension of 60% of the employees’ pension. Employees with at least 10 years of service will receive a minimum of Rs 10,000 per month. Under UPS, both the assured pension and family pension will be adjusted for inflation. Retirees under the UPS will receive dearness Relief .Employees will receive a lump sum payment at retirement .Benefits of switching to UPS are as given as-1-Higher Government Contribution-One of the most significant advantages of UPS is the increased government contribution of 18.5% ,compared to 14% under NPS .This boost in contribution is expected to result in a larger pension corpus, ensuring better financial security post-retirement. 2-Guaranteed Pension -UPS guarantees a pension equal to 50% of the average salary over the last 12 months of service .This assurance makes UPS a safer option for risk -averse employees ,particularly given the market volatility that can impact the returns on NPS investments. 3-Minimum Payout and Lump Sum Benefits-For employees with at least 10 years of service ,UPS offers a minimum monthly payout of Rs 10,000,providing a safety net for lower earning employees .Additionally ,the scheme includes a lump sum payment at retirement ,linked to the duration of service ,offering further financial support. 4-Investment Flexibility and Market Risks—While UPS offers a guaranteed pension ,it limits the potential of higher return that NPS might offer through market linked investments .
Under NPS, employees can choose from various investment options ,including up to 65% in government securities,15% in equities, and reminder in corporate bonds .However ,these investments are subject to market risks ,and final pension may vary .
In contrast ,UPS protects employees from market fluctuations ,providing a stable and predictable income stream in retirement .For many ,especially those nearing retirement ,this stability may outweigh the potential for higher returns under NPS .Some argue that UPS represents a step back from the market -linked reforms introduced with NPS .However ,UPS retains the core principle of a defined contribution scheme ,with additional safeguards to ensure a minimum pension .It also addresses the growing demand for a guaranteed pension among government employees ,without reverting to the unfunded liabilities of the Old Pension Scheme .
One of the most significant advantages of UPS is the increased government contribution of 18.5% ,compared to 14% under NPS .This boost in contribution is expected to result in a larger pension corpus ,ensuring better financial security post-retirement .Under UPS ,employees contribute 10% of their salary while government contributes 18.5%.Under NPS, employees contribute 10% of their salary ,while the government contributes 14%. Under OPS, there is no contribution from employees ,government bears entire cost.UPS linked to all India consumer price index -CPI for industrial workers.UPS is set to benefit 23,00000 government employees as per the government. The UPS is initially meant for central government employees and in due course of time it will be implemented in states and UT’s as well. Union cabinet has decided and announced the UPS because the government employees were dissatisfied with the NPS because there were risks associated with it as it is linked to market risks and there is no guarantee of monthly pension and were demanding OPS ,but the government has devised UPS to remove resentment and insecurity of monthly pension. The finance department of Jammu and Kashmir UT has ordered the physical verification of the pensioners to be done by the concerned treasury officers and that too in these days of scorching heat and humid climate and the old pensioners were forced to stand in long queues in the office of the treasury officers and had to fulfill many formalities to get the PPO verified along with their physical verification.
One wonders as to why is government putting the old pensioners to trouble off and on. The government must realize that pensioners had contributed and served a lot during their service and so this important section of the society should be respected and not put them to inconvenience and harassment now and then in the name of verification of their pension. Besides the government annually /sic monthly orders and instructs this poor and innocent lot to produce living certificates. The government should verify the life of the pensioners through digital application in these days of science and technology. A sizable number of Jammu and Kashmir government pensioners are living outside J&K in various parts of the country.
The finance department of J&K has not given any method for the physical verification of such pensioners. This has created much harassment and discontent among these pensioners. The government should either exempt the pensioners who are putting up outside J&K from the physical verification or alternatively devise some easy method for these pensioners so that their pension and physical verification to done outside from Jammu and Kashmir that is at the places where they are living presently and it should be done through Jammu and Kashmir Bank or any other Bank where from these pensioners are drawing their monthly pension to save them from the harassment and inconvenience .
Some pensioners have rightly said that PPO stands for pensioners prisoners order .Coming back to the UPS ,it is far better than NPS because there is no element of risk associated with the pension .Although there is higher yield in NPS because of market risk. A big number of pensioners are in favor of the NPS and it should be continued for these pensioners who favor it and they should be given the option of choosing between the UPS and NPS.
However, the Unified Pension Scheme introduced by the Union cabinet under Prime Minister Narendra Modi, has sparked widespread concern and resistance among government employees. Government employees are now demanding the reinstatement of the OPS, which they believe is far superior.
The OPS provided financial security and peace of mind in retirement, something the UPS fails to ensure. The continuation of the OPS for MPs and MLAs while denying it to the government employees has further fueled discontent. Employees are questioning the fairness of this selective application of pension policies.
If the OPS is still viable and beneficial for lawmakers, they argue why is it not extended to those who serve the public in various government departments? It is in the fitness of things to mention that a pensioner’s organization known as National Old Pension Restoration United Front is against UPS and it has submitted a memorandum to the Prime minister demanding reverting to OPS in the interest of the pensioners.
Some argue that the OPS is the best because there is no risk associated with the pension and there is utmost security of minimum pension under the old pension scheme. Categorically speaking no pension scheme is full of benefits only but UPS is a better scheme having bigger contribution of 18.5% from the government .
Still some consider OPS better given the financial security to the pensioners and therefore the government should concede the demand for restoring OPS to rid the market risks associated with NPS and give a thought to it and concede this demand of the pensioner’s.
(The author is a columnist, social and KP activist)