New pension scheme: Kerala govt's contribution to pose hurdle
The government is currently evaluating whether it can ensure a pension amounting to at least half of an employee's last drawn salary, as proposed in the National Pension System.
The government is currently evaluating whether it can ensure a pension amounting to at least half of an employee's last drawn salary, as proposed in the National Pension System.
The government is currently evaluating whether it can ensure a pension amounting to at least half of an employee's last drawn salary, as proposed in the National Pension System.
Thiruvananthapuram: The new pension scheme proposed by the state government as a replacement for the existing contributory pension system, aims to guarantee a fixed percentage of an employee's salary as pension.
The government is currently evaluating whether it can ensure a pension amounting to at least half of an employee's last drawn salary, as proposed in the National Pension System (NPS) implemented by the central government. However, the state is not in a position to match the central government’s contribution of 18.5% to the pension fund.
Under the current contributory pension scheme, the central government has set a 10% contribution from employees, while contributing 14% on its end. In contrast, Kerala continues to provide only 10% as its share of the pension fund.
The state government, however, will be unable to guarantee a pension equivalent to half of the last drawn salary without significantly increasing its contribution. This leaves the state with two options: either increase its own contribution or simultaneously raise the contribution rates for both the government and employees.
Currently, Kerala has 3.25 lakh employees under its statutory pension scheme and an additional 2 lakh government employees under the contributory pension scheme.
Statutory Pension Scheme
Under the statutory pension scheme, the average of the last ten months’ basic salary is halved. This amount is then multiplied by the total years of service and divided by 30 to calculate the monthly pension. Employees who retire under this scheme can expect to receive almost half of their last-drawn salary as pension, along with Dearness Allowance (DA) payments twice a year, amounting to one-tenth of their monthly emoluments (pay + DA).
Contributory Pension Scheme
In the contributory pension scheme, both employees and the government contribute 10% of the basic salary and DA to the pension fund. Upon reaching superannuation at the age of 60, employees can withdraw up to 60% of the total amount accumulated in the fund. The remaining 40% is then invested into different pension schemes, as chosen by the retiree. However, this scheme does not guarantee a minimum pension or any DA.
Unified Pension Scheme
In the proposed unified pension scheme, the employee’s contribution remains at 10%, while the government contributes 18.5%. This system guarantees that retirees will receive at least half of their basic salary as pension, with a minimum pension of Rs.10,000. Additionally, DA will be paid twice a year.
Kerala to Make a Decision Soon
"The state will soon explore options for implementing the new pension scheme. While the Centre has outlined the benefits of the Unified Pension Scheme, it has yet to reveal the formula for calculating pension under this scheme. Kerala is also embarking on a plan that will ensure a minimum pension amount for retired employees," said Finance Minister K N Balagopal.