Rethink on NPS for govt. employees: Committee formed under Finance Secretary, no deadline set

The committee has been tasked with evolving an approach that addresses government employees’ needs while maintaining fiscal prudence to protect the common citizens

Finance Minister Nirmala Sitharaman | Photo Credit: SHAILENDRA BHOJAK

The Finance Ministry on Thursday notified the formation of a committee to review the pension system for government employees as announced by Finance Minister Nirmala Sitharaman in Parliament, while moving amendments to the Finance Bill of 2023.

Some Opposition-ruled States have announced a switchover for employees covered by the National Pension System (NPS) to the Old Pension Scheme that assured 50% of last drawn salaries as pension, while States such as Maharashtra, where the BJP is part of the ruling alliance, are mulling the same.

The order does not specify a deadline for the panel, which Ms. Sitharaman had said was being formed as “representations have been received that the NPS for government employees needs to be improved”. The Minister had told the Lok Sabha on March 24 that the approach developed by the committee would apply to the Centre as well as the States.

The four-member committee will be led by Finance Secretary T.V. Somanathan and includes the chairman of the Pension Fund Regulatory and Development Authority (PFRDA) that oversees the NPS adopted for government employees hired on or after January 1, 2004. The NPS, earlier referred to as the New Pension Scheme for government employees, offers no guaranteed pension.

The committee, which will also include Secretary, Department of Personnel and Training and Special Secretary in the Department of Expenditure of the Finance Ministry, has been tasked with evolving an approach that addresses government employees’ needs while maintaining fiscal prudence to protect the common citizens, said an official order.

The terms of reference of the panel require it to deliberate over whether any changes are warranted to the NPS structure and if so, to suggest ways to improve the pensionary benefits of government employees covered by it “keeping in view the fiscal implications and impact on overall budgetary space”.

The NPS review committee has also been empowered to co-opt any officer of the Central government and devise its own mechanisms for consultations with States and other stakeholders, to arrive at its recommendations. The personnel division of the Expenditure Department will operate as the committee’s secretariat.