The ongoing swings in the stock market are raising concerns beyond retail investors, extending to central government employees whose retirement savings under the National Pension System are largely exposed to market-linked assets.
As a large section of NPS members approaches retirement from 2033, several staff organisations are calling for the inclusion of an assured pension scheme under the 8th Pay Commission framework.
The All India NPS Employees Federation (AINPSEF), in a memorandum presented to the 8th Pay Commission on Sunday, has urged the introduction of an assured pension mechanism. It has been suggested that pensioners should be entitled to 50% of their final salary plus dearness allowance.
Its plan envisages the state continuing to hold its share of the NPS contribution, while also committing to a fixed minimum pension for employees upon retirement.
According to AINPSEF, persistent volatility in the markets has limited the expansion of the NPS retirement corpus for a large number of employees. The federation warned that the returns are failing to keep up with inflationary pressures, which could adversely affect pension income in the future
As things stand, employees of the central government allocate 10% of their basic pay and DA to the NPS Tier-I scheme, whereas the government contributes 14% of the employee's basic salary and dearness allowance to the pension account.
Citing the case of a Level 7 employee who served for 32 years and eight months, AINPSEF said the individual would accumulate an NPS corpus of Rs 3.13 crore. Of this, the employee's own contribution would account for Rs 1.30 crore, while the government's share would stand at Rs 1.82 crore.
The federation estimated that the employee's salary at retirement would be around Rs 3.32 lakh, with dearness allowance projected at 30% under the prevailing pay commission structure at the time.
The federation maintains that the Centre can hold back its Rs 1.82 crore contribution to the employee's NPS fund and instead offer a fixed pension amounting to half of the last drawn pay, along with Dearness Relief (DR). It has also recommended a family pension pegged at about 30%, equivalent to 60% of the pension payable to the retiree, after the pensioner's demise.
According to AINPSEF, the present NPS model lacks a built-in system that allows the government to recover funds over time, effectively making it a long-term fiscal outflow. The body argues that if the Centre retains its contribution component, the resulting cyclical financial flow would help make guaranteed pensions financially viable.
The federation has argued that the current NPS model delivers satisfactory outcomes mainly for employees who remain in regular service for more than three decades. By contrast, employees on lower pay scales and with shorter service periods often retire with minimal pension support.
AINPSEF further noted that sectors such as teaching and the railways rely heavily on work-charge, contractual and daily wage staff, many of whom spend years in irregular service before eventual regularisation.
The federation maintained that pension support for employees on lower pay scales becomes extremely limited in cases involving voluntary retirement, premature exit from service or compulsory retirement, making it difficult for retirees to sustain themselves adequately.
"Employees belonging to lower pay levels (Level-1 to Level-5) generally accumulate comparatively smaller pension corpus. This creates serious insecurity among lower and middle-income employees," AINPSEF said.
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