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4th March 2023 (8 Topics)

Old Pension Scheme for Central government employees

Context

In a significant decision, the government has decided to give a one-time option to select Central government employees to migrate to the Old Pension Scheme (OPS).

Background

  • In 2020, the Department of Pension and Pensioners’ Welfare (DPPW) gave a one-time option to those Central government employees to opt for the OPS who were declared successful for recruitment in the results declared before December 31, 2003.
  • Recently, the department has called that in all cases where a Central government civil employee has been appointed against a post or vacancy which was advertised/notified for recruitment/appointment, prior to the date of notification for the NPS i.e. 22.12.2003 and has been covered under the NPS on joining service on or after 01.01.2004, may be given a one-time option to be covered under the CCS (Pension) Rules, 1972 (now 2021).
  • This option may be exercised by the concerned government servants latest by 31 August 2023.

About the proposal:

  • The government has decided to allow the selected Central government employees, who applied for jobs advertised before December 22, 2003, the day the National Pension System (NPS) was notified but joined the service in 2004 when the NPS came into effect.

Who are eligible to apply?

  • The order will be applicable to Central Armed Police Force (CAPF) personnel and other Central government employees who joined the services in 2004 as the recruitment process was delayed due to administrative reasons.
  • The employees’ contributions to the NPS will be credited to the General Provident Fund (GPF) of the individual.

Till January 31 2023, there were 23, 65,693 Central government employees and 60, 32,768 State government employees enrolled under the NPS. Except for West Bengal, all States had implemented the NPS.

The New Pension Scheme (NPS):

  • The New Pension System proposed by the Project OASIS report became the basis for pension reforms and what was originally conceived for unorganised sector workers, was adopted by the government for its own employees.
  • The NPS was for prospective employees; it was made mandatory for all new recruits joining government service from January 1, 2004.
  • Contributions:
    • The defined contribution comprised 10 per cent of the basic salary and dearness allowance by the employee and a matching contribution by the government this was Tier 1, with contributions being mandatory.
    • In 2019, the government increased its contribution to 14 per cent of the basic salary and dearness allowance.
  • Schemes under the NPS are offered by nine pension fund managers
    • It is sponsored by SBI, LIC, UTI, HDFC, ICICI, Kotak Mahindra, Aditya Birla, Tata, and Max.
  • It laid in its promise of an assured or ‘defined’ benefit to the retiree.
  • It was hence described as a ‘Defined Benefit Scheme’.
  • For example - if a government employee’s basic monthly salary at the time of retirement was Rs.10, 000, she would be assured of a pension of Rs.5, 000.
  • The monthly pay-outs of pensioners also increased with hikes in dearness allowance or DA announced by the government for serving employees.

What is DA?

  • It is calculated as a percentage of the basic salary.
  • It is a kind of adjustment the government offers its employees and pensioners to make up for the steady increase in the cost of living.
  • DA hikes are announced twice a year, generally in January and July.

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