India approves assured pension scheme for federal government employees

Programme guarantees employees 50% of base salary as a pension rather than a figure linked to market returns

The Unified Pension Scheme for India’s more than two million federal government employees is set to be implemented from April 1st, 2025, says Ashwini Vaishnaw, a cabinet minister. Photograph: Shutterstock

The Indian government approved on Saturday a pension scheme which will guarantee federal government employees 50 per cent of their base salary as a pension, moving away from a current scheme where the payout is linked to market returns.

The Modi government has been forced to reassess the current pension system, adopted after a significant fiscal reform in 2004, as some states switched back to the older, fiscally straining system of fully funding a guaranteed pension.

The New India. The Unmaking of the World’s Largest Democracy: a country with a very dark sideOpens in new window ]

The Unified Pension Scheme (UPS) for India’s more than two million federal government employees is set to be implemented from April 1st, 2025, said Ashwini Vaishnaw, a cabinet minister.

He said it would ensure 50 per cent of the base salary drawn during the last 12 months before retirement as a pension for government employees who completed a minimum of 25 years of service.

READ MORE

Recent rape and murder of junior medic highlights persistent crimes against women in IndiaOpens in new window ]

The current national pension scheme requires employees to contribute 10 per cent of their base salary and the government 14 per cent. The eventual payout depends on the market returns on that money, which is mostly invested in federal debt.

Trade unions and opposition parties have been advocating for a guaranteed minimum pension for government employees, and it was a major political issue in the recent general elections.

The financial implication of the UPS on the government exchequer is expected to be about 62.5 billion rupees (€665 million) in the fiscal year 2024-2025, with the annual cost varying each year depending on the number of retiring employees, the minister said. – Reuters