The Andhra Pradesh government is planning to implement a Guaranteed Pension System (GPS) for its employees, which is a hybrid model of the Old Pension Scheme (OPS) and the New Pension Scheme (NPS). The GPS was approved by the state assembly on September 27, 2023, and is expected to come into effect from April 1, 2024.
What Is Guaranteed Pension System?
Under the GPS, all state government employees will be eligible for a guaranteed monthly pension of 50% of their last drawn basic salary and dearness allowance. The government will make a matching contribution to the employee’s NPS account, and the employee will have the option to choose from different investment options.
Any shortfall in the pension amount from the NPS corpus will be borne by the state government. This ensures that employees are guaranteed a minimum pension of 50% of their last drawn salary, even if their NPS investment returns are lower.
The GPS has been welcomed by many state government employees, who have been demanding a return to the OPS.
The Andhra Pradesh government has started the process of implementing the GPS. The state government has issued a notification to all departments and agencies, asking them to provide details of their employees’ NPS accounts. Reportedly, the government is also in the process of appointing a pension fund manager for the GPS.
The GPS is expected to benefit over 3 lakh state government employees in Andhra Pradesh.
What Are NPS and OPS?
OPS and NPS stand for Old Pension Scheme and National Pension System, respectively. Both are pension schemes for government employees in India.
Old Pension Scheme (OPS)
The OPS is a defined benefit pension scheme, which means that employees are guaranteed a fixed pension after retirement. The pension amount is calculated based on the employee’s last drawn salary and service period. The government is responsible for funding the OPS.
National Pension System (NPS)
The NPS is a defined contribution pension scheme, which means that employees and the government contribute a certain percentage of the employee’s salary to the employee’s NPS account. The contributions are invested in a variety of financial instruments, such as equity, debt, and government bonds. The pension amount is calculated based on the corpus accumulated in the employee’s NPS account at the time of retirement.
Government employees make a monthly contribution at the rate of 10% of their salary and government’s contribution rate is 14%.
NPS was launched in India in 2004.
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