PM Modi to discuss pension scheme restoration with unions.

JOINT CONSULTATIVE MECHANISM (JCM)

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Context: The Prime Minister to meet Joint Consultative Mechanism (JCM) staff representatives to discuss diverse issues, including restoring the old pension scheme.

Details

The Prime Minister is to meet with the Representatives from the joint consultative mechanism of the Union employees.
This meeting is expected to resolve the concerns of government employees, including the pension scheme.

Old Pension Scheme (OPS)

●Under the old pension scheme, the pension of the Union and State government employees was fixed at 50% of the last drawn basic pay.

For example: If a government employee’s basic monthly salary at the time of retirement was Rs 40,000, he/she would get a pension of Rs 20,000.
The monthly amount of pensioners also increased with an increase in dearness allowance (DA) announced by the government for serving employees.

●On 1st January 2004, the New Payment System (NPS) replaced the old Pension Scheme, which came into effect for employees joining government service from 1st January 2004,

National Pension Scheme

●It is a voluntary and long-term investment plan for retirement.

●It is regulated by the Pension Fund Regulatory and Development Authority (PFRDA).

●Earlier, Central Government employees joining on or after 01-01- 2004 are mandatorily covered under the NPS. Now, it is open to all Indian citizens voluntarily.

●Who can join NPS?

An Indian citizen (resident or non-resident) or a Non-Resident Indian (NRI).
Aged between 18 – 70 years.

●It encourages people to invest in a pension account at regular intervals during the course of their employment.

After retirement, the subscribers can take out a certain percentage of the total invested.
The account holder will receive the remaining amount as a monthly pension.
Presently, a person can withdraw up to 60% of the total corpus as a lump amount after retirement, with the remaining 40% going as a monthly pension.

●A portion of the NPS amount goes to equities (this may not offer guaranteed returns). However, it offers returns that are much higher than other traditional tax-saving investments and Bank Savings or Fixed Deposit accounts.

NPS subscribers can contribute to the NPS fund at any time in a financial year and change the number of subscriptions.
They can choose their own investment options.
They can operate their account online from anywhere.

●As per the Budget 2024, the contribution allowed by employers has been increased from 10% to 14% of the salary. This change will be effective from 1st April, 2025.

●The Budget 2024-25 proposed the introduction of NPS Vatsalya, where parents can open an NPS account for their minor children and contribute an amount every month or year until they reach 18 years old.

Once the children are 18 years old, they can manage the account independently by converting the NPS Vatsalya account into a normal NPS account.

About Joint Consultative Mechanism (JCM)

It is an important platform for communication between the government and its employees.
It includes representatives from various worker's unions.
It aims to address and resolve issues associated with employment conditions, salaries, and other employment-related matters.

Key Points to be discussed during the meeting

Restarting the Old Pension Scheme

Under the old pension scheme, employees received a guaranteed monthly pension benefit for a lifetime based on employees' last drawn salary.
In 2004, the government replaced the old pension scheme and introduced a new pension scheme (NPS), under NPS, the pension amount depends on the contribution made by the employees during the working period. The return amount is also subject to market fluctuations.
The main concern of the employees is that the new pension scheme offers less financial security compared to the old pension scheme, thus increasing vulnerability and also resulting in instability in post-retirement financial planning.

Privatization of Public Sector Units

The workers’s union has raised concerns about the privatization of Public Sector Units (PSUs).
Fear of job loss due to privatization reduces job security, and lack of job security negatively affects the work environment.
Concern over privatization that it would prioritize profit over public welfare and the quality of public service will degrade.

Significance of the meeting

It will provide an opportunity for employees to raise their concerns directly to the highest level of government.
The discussion will help the government to understand the challenges faced by the employees in a better way, and also help in formulating policies based on ground realities and addressing implementation challenges.

Conclusion

The meeting between the Prime Minister and JCM representatives is an opportunity for employees to present their concerns and demands to the top level, and at the same time, it is also a golden opportunity for the government to understand the ground realities and challenges faced by the employees, and address their issues in a planned and effective manner to improve the overall working environment and empower them to contribute in the vision of Atmanirbhar Bharat.

Source:

The Hindu

Cleartax

PRACTICE QUESTION

Q. Consider the following statements in the context of the New Pension Scheme:

1. It is regulated by the Pension Fund Regulatory and Development Authority (PFRDA).

2. Central Government employees joining on or after 1st January 2010 are mandatorily covered under the NPS.

3. The Budget 2024-25 proposed the introduction of NPS Vatsalya, where parents can open an NPS account for their minor children.

Select the correct answer using the codes given below:

A) 1 and 2 only

B) 2 and 3 only

C) 1 and 3 only

D) 1, 2 and 3

Answer: C