Sikkim government to form committee to study 'Old Pension Scheme', will submit report within 3 months

With the demand for the restoration of the old pension scheme gaining momentum, the Sikkim government in a decisive move has decided to form a committee to examine and study all aspects of the Old Pension Scheme (OPS) as compared to the New National Pension Scheme (NPS). 

The decision to form a committee was made during a meeting with concerned officials chaired by Sikkim Chief Minister Prem Singh Tamang to discuss demands of state government employees to reinstate the Old Pension Scheme in place of the New Pension Scheme.

According to reports, the committee will submit its report within three months.

The committee will be chaired by Secretary (DoP) Rinzing Chewang, with Controller of Accounts cum Secretary Finance Department MCP Pradhan and Additional Director (Pension Division of the Finance Department) Punita Alley as members.

Meanwhile, on December 11, Sikkim government employees will rally in support of their demand under the banner of the All Sikkim Government Employees Association.

Many employees covered by the new contribution-based pension system receive monthly pensions of as little as Rs 700-800, whereas the minimum guaranteed amount in the old defined benefit scheme is Rs 9,000. They are now required to contribute 10% of their monthly wages, which the government will match and invest in equity shares. Pensions are based on the returns on that accumulated investment.

The government used to pay the entire pension amount, while fixed returns were guaranteed for employee contributions to the General Provident Fund. After retiring, the government pays 50 per cent of the last drawn salary plus dearness allowance as a pension to employees and their department family members in the event of death.

How is New Pension Scheme different from Old Pension Scheme?

The National Pension System (NPS) is a defined contribution scheme that is mandatory for all new Central government recruits (except the armed forces) starting on or after January 1, 2004. Except for West Bengal, all state governments have made it mandatory.

The scheme was extended to all Indian citizens between the ages of 18 and 60 in 2009, but the 10 per cent government contribution is only available to government employees. The NPS is governed by an independent Pension Fund Regulatory and Development Authority (PFRDA), which was established in 2013.

Tier 1 of the NPS is mandatory for all government employees and has a fixed lock-in period. Subscribers can withdraw their accumulated wealth only after they retire, or reach the age of 60. In the event of an emergency, a recent amendment allows them to withdraw 25 per cent of the employee contribution.

Even after retirement, subscribers can withdraw only 60 per cent of the total amount, which is taxable, and the remaining 40 per cent must be invested in a lifelong annuity scheme through an IRDA-regulated insurance company. If they leave the scheme or retire before reaching the age of 60, they must invest 80 per cent of their pension wealth in the annuity scheme.

Tier 2 is a voluntary account that serves as a replacement for the GPF and allows you to withdraw any amount at any time. The government does not make any contributions to the tier 2 account. The NPS, unlike the pension and GPF in the previous scheme, does not guarantee any fixed returns because it is market-linked.

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