India Approves Assured Pension Scheme for Federal Government Employees, Reports Reuters

The Indian government has approved a new pension scheme that will guarantee federal government employees 50% of their base salary as a pension, moving away from the existing system tied to market returns. This decision comes after a review of the current pension structure, which was established following significant fiscal reforms in 2004. Several states have reverted to a previous system that fully funds guaranteed pensions, prompting the need for re-evaluation.

The Unified Pension Scheme (UPS) will be implemented for over two million federal employees starting April 1, 2025, according to Cabinet Minister Ashwini Vaishnaw. The scheme will provide retiring government employees, who have served a minimum of 25 years, with a pension amounting to 50% of their base salary from the last year of service.

Under the existing National Pension Scheme, employees are required to contribute 10% of their base salary, while the government contributes 14%. The pension payout is contingent on market returns from the investments, which primarily include federal debt.

Trade unions and opposition parties have long advocated for a guaranteed minimum pension for government employees, making it a significant topic in recent general elections. The estimated financial impact of the UPS on government finances is about 62.5 billion rupees (approximately $745 million) for the fiscal year 2024-25, with annual costs fluctuating based on the number of employees retiring each year, according to the minister.