Finance Minister Nirmala Sitharaman announced on Tuesday that the government will develop a solution to address issues related to the New Pension Scheme (NPS), aiming to ensure fiscal prudence.
Committee Review
- Formation of Committee: Last year, the Finance Ministry established a committee under Finance Secretary T.V. Somanathan to review the NPS for government employees.
- Objective: The committee is tasked with suggesting potential changes to the existing framework and structure of the National Pension System.
Opposition to NPS
- State Reactions: Several non-BJP-ruled states have opted to revert to the DA-linked Old Pension Scheme (OPS).
- Employee Demands: Some employee organizations in other states have also demanded a return to the OPS.
Budget Speech Highlights
- Committee Progress: In her Budget Speech in the Lok Sabha, Sitharaman noted that the committee has made significant progress.
- Constructive Approach: She commended the staff side of the National Council of the Joint Consultative Machinery for Central Government Employees for their constructive approach.
Proposed Changes and Measures
- Fiscal Prudence: Sitharaman emphasized that the forthcoming solution will address relevant issues while maintaining fiscal prudence to protect common citizens.
- OPS Details: Under the OPS, retired government employees receive 50% of their last drawn salary as a monthly pension, with amounts increasing with DA hikes.
Social Security Improvements
- NPS Contribution Increase: The Finance Minister proposed increasing the employer’s NPS expenditure deduction from 10% to 14% of the employee’s salary.
- Private Sector Adjustments: A similar deduction of up to 14% from employee salaries in the private sector, public sector banks, and other undertakings opting for the new tax regime is proposed.
New Initiatives
- NPS-Vatsalya: A new plan, ‘NPS-Vatsalya’, will be introduced to allow contributions by parents and guardians for minors.
- Conversion Option: Upon reaching the age of majority, the ‘NPS-Vatsalya’ plan can be seamlessly converted into a regular NPS account.
Multiple-Choice Questions (MCQs):
- Who is leading the committee reviewing the New Pension Scheme (NPS)?
- A) Finance Minister Nirmala Sitharaman
- B) Finance Secretary T.V. Somanathan
- C) Prime Minister Narendra Modi
- D) RBI Governor Shaktikanta Das
- Answer: B) Finance Secretary T.V. Somanathan
- What has been the reaction of several non-BJP-ruled states towards the NPS?
- A) They have adopted the NPS.
- B) They have proposed new pension reforms.
- C) They have reverted to the DA-linked Old Pension Scheme (OPS).
- D) They have reduced pension benefits.
- Answer: C) They have reverted to the DA-linked Old Pension Scheme (OPS).
- What is the proposed increase in the employer’s NPS expenditure deduction?
- A) From 5% to 10%
- B) From 10% to 14%
- C) From 14% to 20%
- D) From 7% to 12%
- Answer: B) From 10% to 14%
- What new plan will be introduced to allow contributions for minors?
- A) NPS-Kid
- B) NPS-Junior
- C) NPS-Vatsalya
- D) NPS-Youth
- Answer: C) NPS-Vatsalya
- How can the ‘NPS-Vatsalya’ plan be converted once the minor attains the age of majority?
- A) It must be closed and a new account opened.
- B) It can be converted seamlessly into a regular NPS account.
- C) It requires special authorization.
- D) It will automatically convert into a pension scheme.
- Answer: B) It can be converted seamlessly into a regular NPS account.