Budget 2024: Central govt employees may get 50% of last- drawn salary as pension under NPS, says report

Budget 2024:As the Finance Ministry is gearing up to present the full fiscal year budget for 2024-25, the National Democratic Alliance (NDA) government isconsidering offering 50 per cent of the last salary drawn as pension under the National Pension System (NPS) to central government employees, according to a report by the Times of India.

This is being considered despite the attractive returns for those who remain invested for 25-30 years, especially for those recruited after 2004, said the report.

The NDA government’s move is likely to address the concerns of central government employees about the pension.

A panel led by Finance Secretary TV Somanathan has gauged the impact of providing an assured return. The committee, which was formed following an announcement by Finance Minister Nirmala Sitharaman, has also reviewed global practices and the adjustments implemented by the Andhra Pradesh government, according to the report.

“There is growing acknowledgement within the govt of offering a 50 per cent guarantee” and in case of any shortfall, the government will fill the gap, the report added.

The Somanathan panel’s recommendations came amid concerns over the pension system for central government employees.

The government pension system operates without funding as the Centre does not have a retirement fund.

In the Budget 2024, it is anticipated that the NDA government will create a retirement fund.

About NPS

The National Pension System is a voluntary, long-term retirement savings scheme. It helps providing financial security to individuals during their post-retirement period.

The NPS is regulated by the Pension Fund Regulatory and Development Authority (PFRDA) and operates on a defined contribution basis.

Under the NPS, subscribers contribute regularly towards their retirement account during their working years, which is then invested in various financial instruments such as equity, corporate bonds, government securities, and alternative assets.

The accumulated corpus is managed by Pension Fund Managers (PFMs) appointed by the PFRDA.

The NPS offers tax benefits under Section 80C of the Income Tax Act and also provides an additional deduction under Section 80CCD(1B).