In place of the present Contributory Pension Scheme (CPS), the Andhra Pradesh government is preparing to implement a Guaranteed Pension Scheme (GPS) for state government employees.
The reintroduction of the Old Pension Scheme (OPS), which was phased down after 2004, would, however, place a significant financial strain on the state exchequer and future generations, according to Buggana Rajendranath, Minister of Finance, Planning, Legislative Affairs, and Commercial Taxes.
The state's government employees have been calling for the OPS to be reinstated in favour of the existing CPS, which has no guaranteed pension and is linked to bank interest rates. As bank interest rates fall, the current CPS, which is already "meagre," is expected to fall much lower, according to employees.
"In such a scenario, our government plans to introduce a Guaranteed Pension Scheme to protect the interests of future generations and the State," the minister stated.
In the proposed GPS, the employee is promised a pension of 33% of the last drawn basic pay, with no reduction. It would also allow an employee to estimate the amount of their pension in advance, without having to worry about interest rate changes or other financial market factors.
"Market circumstances will have no impact on the pension under GPS, which is over 70% higher than the current pension granted under CPS, based on current interest rates," Rajendranath stated.
Choices
The government has presented the staff with two choices to consider. If an employee pays 10% of his salary every month, the State government will add another 10%, and the employee will get 33% of his last drawn basic pay as a guaranteed pension every month after retirement under the first choice.
If an employee contributes 14% of his income, the government will add another 14%, and the employee will get 40% of his last received basic pay as a pension under the second option.
Impact
According to government projections, if current CPS employees are awarded OPS benefits, committed expenditure as a share of State-owned resources on salaries, pensions, and required expenditure will increase by 181 percent by 2040.
It should be emphasised that government employees accross states have been clamouring for a return to the old pension scheme. The Rajasthan government recently announced the reintroduction of OPS.
