 "Nirmala Sitharaman, Nirmala, Finance Minister")
Sitharaman also clarified that there will be no change in tax treatment under the UPS. (Photo: PTI)
Union Finance Minister Nirmala Sitharaman on Tuesday said the Unified Pension Scheme (UPS) is not a “compulsion for states,” as they are capable of making their own independent decisions.
However, Sitharaman expressed hope that most states would adopt UPS “as it has a lot of benefits for employees.”
“Unified Pension Scheme is an attempt to improve the existing National Pension System (NPS); there is no rollback or U-turn by introducing assured pension under UPS. It is clearly a new package,” Sitharaman said in her first official comments on UPS during a select media briefing.
The Congress party had earlier taken a jibe, calling it a “rollback government” after the Centre introduced UPS. Sitharaman said the Congress party has become a “naara (sloganeering) party.”
Separately, discussing the agenda of the upcoming GST Council meeting scheduled for September 9, Sitharaman said the meeting will discuss rate rationalisation. “However, no decision will be taken in the next meeting. The Group of Ministers (GoM) will hold more meetings to finalise the report,” she added.
Sitharaman said that UPS is resolving the issues that were arising in the Old Pension Scheme (OPS) and National Pension System (NPS).
“The benefit in UPS will be given on a pro rata basis if the service period is less than 25 years. However, the Pension Fund Regulatory and Development Authority will continue to handle funds under UPS,” she added.
Sitharaman also clarified that there will be no change in tax treatment under the UPS.
In a significant enhancement to the pension benefits for central government employees, the Union Cabinet on Saturday approved the Unified Pension Scheme (UPS) with an assured pension of 50 per cent of the average basic pay drawn over the last 12 months prior to superannuation, for a minimum qualifying service of 25 years.
The scheme will come into effect from the beginning of the next financial year starting April 1, benefitting over 2.3 million central government employees, according to the government. The amount would be proportionate for a shorter service period, down to a minimum of 10 years of service.
The UPS scheme has an assured pension of 50 per cent of the average basic pay over the last 12 months before retirement for a minimum qualifying service period of 25 years.
The scheme also includes an assured minimum pension of Rs 10,000 per month on superannuation after a minimum of 10 years of service.
According to the government, the expenditure for arrears will be Rs 800 crore. The annual cost increase will be around Rs 6,250 crore in the first year.
The scheme will also have two other components: family pension and assured minimum pension.
Under the assured family pension component of the scheme, the family members of the employee will get 60 per cent of the immediate pension upon their demise. Under the assured minimum pension component, the employees will get a minimum of Rs 10,000 on superannuation after a minimum of 10 years of service.
In March 2023, the Narendra Modi government had set up a committee led by former Finance Secretary T V Somanathan to explore ways to improve pension benefits under NPS without reverting to the non-contributory Old Pension System (OPS), which has been deemed fiscally unsustainable.
First Published: Aug 27 2024 | 9:11 PM IST
