Andhra Pradesh government is ready to roll out a Guaranteed Pension Scheme (GPS) to state government employees in place of the current Contributory Pension Scheme (CPS).
However, the re-introduction of the Old Pension Scheme (OPS), which was discontinued after 2004, will result in huge financial burden on the state exchequer and future generations, Buggana Rajendranath, Minister for Finance, Planning, Legislative Affairs & Commercial Taxes, said on Friday.
The government employees in the state have been demanding re-introduction of OPS in the place of current CPS as it has no guaranteed pension and is linked to bank interest rates. As bank interest rates are declining, the present CPS, which itself is “meagre, is bound to decrease further, as per the contention of the employees.”
“In such a scenario, to safeguard interests of the future generations and of the State, our government intends to bring in a Guaranteed Pension Scheme,’‘ the minister said.
In the proposed GPS, the employee consistently receives a guaranteed pension of 33 per cent of the last drawn basic pay without any reduction. It would also enable an employee to assess the amount of pension in advance without being worried about the changes in the interest rates and other financial market dynamics.
“Market conditions will have no influence on the pension under GPS which is nearly 70 per cent higher than the present pension being offered under CPS, in line with the present interest rates,” said Rajendranath.
Options
Two options are being proposed by the government to be considered by the employees. Under the first option, if an employee contributes 10 per cent of his salary every month, the State government will add another 10 per cent to it and the employee would receive 33 per cent of his last drawn basic pay as a guaranteed pension every month after retirement.
Under the second option, if an employee contributes 14 per cent of his salary, the government will add another 14 per cent to it and the employee receives 40 per cent of his last drawn basic pay as pension.
Impact
If employees, who are under CPS now, are given the benefits of OPS, the committed expenditure as a share of the State-owned resources on account of salaries, pensions and mandatory expenditure will go up by 181 per cent by the year 2040, as per government calculations.
It may be noted that there has been a persistent demand from government employees across states for reversal to the old pension scheme. Recently, the Rajasthan government had announced re-introduction of OPS.