Minister of State for Finance Bhagwat Karad on Monday said that there was no proposal for the restoration of the Old Pension System. This comes even as many states launched an agitation for the restoration of the pension system., Kerala, Andhra Pradesh, and Assam have also formed committees to look into OPS. Let’s decipher the Old Pension System.
Employees under the previous plan receive a pension based on a pre-established formula that is equal to 50% of the last wage received. Additionally, they benefit from the twice-yearly modification of the Dearness Relief (DR). There was no salary deduction and the compensation was predetermined. Additionally, the General Provident Fund was a provision of the OPS (GPF).
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Only Indian government personnel have access to GPF. It permits all government workers to pay a portion of their salaries into the GPF. At the time of retirement, the employee receives the complete amount that has accumulated throughout their employment.
On the other hand, the National Pension System is a voluntary, defined contribution retirement savings plan created to help members make the best choices for their future via methodical saving throughout their working lives. The NPS aims to help persons develop the habit of saving for their retirement. The new pension scheme is an effort to discover a long-term solution to the issue of giving each Indian person a sufficient retirement income.
As part of the NPS, individual deposits are combined into a pension fund and invested by PFRDA-regulated professional fund managers following authorised investment rules in varied portfolios that include stocks, bonds, and bills from companies and the government.
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Depending on the profits received on the investments placed, these contributions would increase and accrue over time till retirement.
Issues with NPS-
In contrast to OPS, the NPS mandates that employees deposit 10% of their base salary as well as the dearness allowance.
In the new pension scheme, the amount is not fixed, and there is no GPF benefit.
The scheme’s return-based nature and market linkage are its main drawbacks hence it is quite unpredictable.
