Interim Budget 2024 expected to provide National Pension System update: Details

Budget 2024: The February 1 interim budget is likely to give an update on the National Pension System (NPS). The team, led by finance secretary TV Somanathan, reviewing the scheme, is expected to submit its report by the end of this month.
According to an ET report, the committee has explored certain adjustments and assurances during its discussions. However, the members are reluctant to increase the financial burden or revert to the old pension scheme, as per the mentioned sources.The government may opt for public consultations before making any decisions.
"The fine print is being worked out," one of the officials told the financial daily. The report will center on improving the NPS while addressing concerns from some pensioners compared to the old pension scheme (OPS).

"The report will not be prescriptive and any changes, if at all required, will be weighed against the fiscal impact and it will be then put for the public consultation," the official further added.
In April of the previous year, the government established a committee to examine the matter of pensions within the NPS for government employees. The committee's mandate was to propose solutions for enhancing NPS pension benefits while taking fiscal considerations into account.

The National Pension System has been applied to all central government employees who joined on or after January 1, 2004, excluding those in the armed forces. As per the Pension Fund Regulatory and Development Authority (PFRDA), with the exception of Tamil Nadu and West Bengal, all state governments have notified and implemented the NPS for their employees.
The controversy surrounding the NPS intensified last year when states governed by the Congress party, including Rajasthan, Chhattisgarh, and Himachal Pradesh, opted to return to the previous defined benefit system. Under this system, government employees were entitled to receive 50% of their last-drawn salary as a monthly pension. In contrast, the NPS operates as a defined contribution scheme, where employees build a retirement corpus. It is noteworthy that Rajasthan and Chhattisgarh have since transitioned to BJP-led governments.

The opposition argues that state government employees shouldn't depend on the unpredictable stock market where NPS funds are invested. States that returned to the old pension system also requested a refund of the accumulated NPS corpus, but the government rejected it, stating it's not possible under current laws.
The government has said that the old pension scheme is not financially viable because it continually increases the burden on the treasury, which is why it was discontinued.
The Reserve Bank of India (RBI) and numerous economists have voiced opposition to reinstating the old pension scheme. They argue that such a decision would disrupt the fiscal equilibrium of the states.
Last month, the government informed the Rajya Sabha that there is currently no proposal being considered for the reinstatement of the old pension scheme (OPS) for central government employees.