The Indian government established a pension scheme on Saturday for public sector employees, guaranteeing 50 per cent of their original income upon retirement. This marks a shift from the ongoing pension programme, linked to market returns, and is in response to several states reverting to the previous system of completely financing a guaranteed pension despite the financial burden.
Having reassessed the existing pension structure adopted post major financial reform in 2004, the Modi administration is now following suit with the Unified Pension Scheme (UPS). Ashwini Vaishnaw, a Cabinet minister, confirmed that UPS, projected to benefit over two million public sector staff, is due to take effect from 1st April 2025.
Under this policy, government employees with a service duration of no less than 25 years will receive a pension equating to half their salary from the last year before retirement. Currently, the national pension programme mandates a 10 per cent contribution from employees’ salaries with the government adding a further 14 per cent. The final pension amount is determined by market returns for these contributions, primarily invested in public debt.
Labour organisations and political opponents have consistently urged a guaranteed minimum pension for public sector workers. This issue was a pivotal focus in recent general elections.
Vaishnaw anticipates the UPS’s impact on the government’s budget will be an estimated 62.5 billion rupees (€665 million) in the 2024-2025 financial year. However, the annual cost will fluctuate depending on the count of retiring employees each year. (Reuters)