The Guaranteed Pension Scheme (GPS), proposed by the Andhra Pradesh government as a mid-way solution to the demand of the state government employees for reverting back to the Old Pension Scheme (OPS), has caught the attention of the Centre, according to a state government official privy to the development.
He said though there was no official communication to the state from the Centre, there were inquiries from Delhi about the GPS, which they found “is interesting” and needs to be studied in detail.
The development comes in the wake of a similar demand from the government employees in several states to do away with the New Pension Scheme (NPS), also known as Contributory Pension Scheme (CPS) and return to OPS. Under the OPS, a government employee gets a monthly pension equivalent to half of the last drawn salary of the individual, till the end of his or her life. There was no need for contribution by the employees.
“Besides, the government will pay dearness allowance declared from time to time on the pension amount, apart from an increment starting from 7.5% for every five years till the death of the employee, which will also be extended to his or her spouse,” Andhra Pradesh government employees’ association leader Bopparaju Venkateshwarlu said.
Under the NPS or CPS, which was introduced with effect from April 1, 2004 and is applicable for all state government employees, who are recruited on or after September 1, 2004, they contribute 10% of their basic salary to the scheme while their employers contribute up to 14 percent during their tenure. The amount is invested in market-linked instruments.
After retirement, an employee can withdraw a part of the pension amount in a lumpsum. As per the rule, 60% of the corpus on maturity is tax-free, while the remaining 40% is taxable and must be invested in annuities for a regular income or pension. Investment in NPS up to ₹1.50 lakh is tax-deductible under Section 80C of the Income Tax Act, 1961.
The employees in several states have been demanding that the NPS or CPS be scrapped and the governments return to the OPS. “Already, quite a few states like Punjab, Haryana, Chhattisgarh and Rajasthan have returned to the OPS,” Venkateshwarlu said.
What is GPS?
Under these circumstances, the GPS proposed by the Andhra Pradesh government has caught the attention of the Centre. It was first proposed in April 2022 and has been in discussion between the state government and the employees’ unions.
According to Venkateshwarlu, under the GPS, the government proposes to pay a guaranteed pension of 33% of the last drawn basic pay without any deduction.
The government proposed two options to the employees. Under the first option, if an employee contributes 10% of his salary every month, the state government will add another 10% to it and the employee would receive 33% of his last drawn basic pay as a guaranteed pension every month after retirement.
Under the second option, if an employee contributes 14% of his salary, the government will add another 14% to it and the employee receives 40% of his last drawn basic pay as pension.
Unlike in the NPS or CPS, where the money invested in the market will not be subject to fluctuations in the market or changes in the interest rates. “The amount is nearly 70% higher than the current pension being offered under CPS, in line with the current interest rates,” state finance minister Buggana Rajendranath said, while proposing the GPS.
Venkateshwarlu said the employees are not willing to accept even this GPS. “In fact, according to our information, the idea of GPS was generated in the bureaucratic circles at the Centre first and borrowed by the Jagan Mohan Reddy government. Now, they are trying to create the impression that the Centre is interested in this proposal,” he said.
He reminded that the YSR Congress Party, in its 2019 assembly elections manifesto, promised the abolition of the CPS and restoration of the OPS. “We only want the chief minister to implement his pre-election promise,” he said.
He pointed out that even though the GPS appears to be better than the NPS, the employees will lose many other benefits like periodical revision of the pension due to increased DA and increments. “The employees will get a fixed amount of 33% of the last salary as pension till their death, without any enhancement. We reject it outright,” he said.
