India approves assured pension scheme for federal government employees Reuters

NEW DELHI (Reuters) – India’s government on Saturday approved a pension scheme that will guarantee federal government employees 50 percent of their basic salary as pension, moving away from a current scheme where payments are linked to market returns.

The Modi government has had to reassess the current pension system, adopted after a significant tax reform in 2004, as some states reverted to the older, fiscally demanding system of fully funding a guaranteed pension.

The Unified Pension Scheme (UPS) for India’s over two million federal government employees is to be implemented from April 1, 2025, Cabinet Minister Ashwini Vaishnaw said.

He said he would provide 50% of the basic pay drawn in the last 12 months before retirement as pension to government employees who complete a minimum of 25 years of service.

The current National Pension Scheme requires employees to contribute 10% of their basic salary and the government 14%. The eventual payout depends on the market return on that corpus, which is largely invested in federal debt.

Unions and opposition parties are pushing for a guaranteed minimum pension for government employees and it was a major political issue in the last general election.

UPS’s financial impact on the government’s exchequer is expected to be around 62.5 billion rupees ($745 million) in the 2024-25 fiscal year, with the annual cost varying each year depending on the number of employees retiring, said the minister.