Indian Government Approves New Pension Scheme

NEW DELHI (Reuters) – On Saturday, the Indian government approved a new pension scheme, guaranteeing federal employees 50% of their base salary as a pension, moving away from the current scheme tied to market returns.

The Modi government is reassessing the pension system put in place after significant fiscal reforms in 2004, as some states reverted to the older, costly system of fully funding guaranteed pensions.

The Unified Pension Scheme (UPS) is aimed at over two million federal government employees and is set to be implemented from April 1, 2025, as announced by Cabinet Minister Ashwini Vaishnaw.

Key Points:
– Employees must complete a minimum of 25 years of service to qualify for the pension.
– The current National Pension Scheme requires a 10% contribution from employees and 14% from the government, with payouts depending on market returns.
– Trade unions and opposition parties have pushed for a guaranteed minimum pension, making it a prominent issue in recent elections.
– The financial implication of the UPS is estimated at about 62.5 billion rupees ($745 million) for the fiscal year 2024-25, varying annually based on the number of retirees.