Sitharaman also clarified that there will be no change in tax treatment under the SPU. (Photo: PTI)
Union Finance Minister Nirmala Sitharaman on Tuesday said the Unified Pension Scheme (UPS) is not an “obligation on states” as they are capable of taking their own independent decisions.
However, Sitharaman expressed hope that most states would adopt UPS “as it has many benefits for employees.”
“The Unified Pension Scheme is an attempt to improve the existing National Pension Scheme (NPS); there is no going back or looking back with the introduction of assured pensions under the UPS. It is clearly a new package,” Sitharaman said in her first official comments on the UPS during a select press conference.
The Congress party had earlier come under fire, calling it a “reversionary government” after the Centre introduced the UPS. Sitharaman said the Congress party has become a “naara (slogan-raising) party”.
Meanwhile, speaking about the agenda of the next GST Council meeting scheduled for September 9, Sitharaman said that the meeting will discuss rate rationalisation. “However, no decision will be taken in the next meeting. The Group of Ministers (GoM) will hold further meetings to finalise the report,” she added.
Sitharaman said UPS is resolving the issues that were emerging in the Legacy Pension System (OPS) and the National Pension System (NPS).
“The benefit at UPS will be granted on a pro-rata basis if the period of service is less than 25 years. However, the Pension Fund Regulatory and Development Authority will continue to manage the funds under UPS,” he added.
Sitharaman also clarified that there will be no change in tax treatment under UPS.
In a significant enhancement of pension benefits for central government employees, the Union Cabinet on Saturday approved the Unified Pension Scheme (UPS) with assured pension of 50 per cent of the average basic salary earned during the last 12 months before retirement, for a minimum qualifying service of 25 years.
The scheme will take effect at the beginning of the next fiscal year, which starts on April 1, and will benefit more than 2.3 million central government employees, according to the government. The amount would be proportional to a shorter period of service, up to a minimum of 10 years of service.
The UPS plan has an assured pension of 50 percent of the average basic salary during the last 12 months before retirement for a minimum qualifying period of 25 years.
The scheme also includes a minimum assured pension of Rs 10,000 per month on retirement after a minimum of 10 years of service.
According to the government, the default expense will be Rs 800 crore. The annual cost increase will be around Rs 6,250 crore in the first year.
The plan will also have two other components: family pension and minimum guaranteed pension.
Under the assured family pension component of the scheme, the family members of the employee will receive 60 per cent of the immediate pension after his death. Under the assured minimum pension component, employees will receive a minimum of Rs 10,000 as retirement benefit after a minimum of 10 years of service.
In March 2023, the Narendra Modi government set up a committee led by former Finance Secretary TV Somanathan to explore ways to enhance pension benefits under the NPS without reverting to the non-contributory Old Pension System (OPS), which has been deemed fiscally unsustainable.
First published: August 27, 2024 | 21:11 IS
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