Centre may offer pension benefits for the '04 batch

NEW DELHI: The government may extend benefits of gratuity, family pension and death gratuity, in addition to the New Pension System (NPS), to employees who have joined government service from ’04. A committee has been appointed to estimate the extent of liability to the government arising out of it.

“The government has appointed a committee that will look into ex-tending these retirement benefits to the employees. The government will have to factor in these liabilities into its budget. The committee will submit its report in a couple of months,” D Swaroop, chairman, PFRDA, told ET.

This could well be under pressure from the Left which has been op-posing the PFRDA Bill. Analysts say gratuity benefits under the overall retirement scheme will to some extent dilute the idea behind the NPS. Since the NPS is based on market returns, by providing fixed benefits such as these, the government is diluting the new pension system.

The Department of Economic Affairs (DEA) in a 2003 circular had notified the NPS, which is the first Defined Contributory system in South Asia with individual retirement accounts, product choices and professional fund management by competing private fund managers.

However, the Department of Personnel and Training (DoPT) on its part has not yet spelt out whether or not the government was willing to extend benefits of gratuity, family pension and disability benefits. These benefits are available to government employees employed before ‘04, the cut-off date for the introduction of the NPS.

The committee will seek to address grey areas, including what happens to the pension of those who die in service or are terminally injured. Under the service rules, the government is mandated to extend these services to pre-2004 employees. In the past, the government has hinted that it may decide against providing for gratuity for its new employees.

Gratuity is primarily a final salary-related lump sum benefit given to staffers at the time of retirement or exit, as an acknowledgement of their services. In India, gratuity is institutionalised under the Payment of Gratuity Act, 1972. The retirement benefits for the central civil service employees were hitherto classified into non-contributory, contributory and other benefits.

Non-contributory benefits covered pensions and gratuity as a function of the length of the qualifying service, and the manner of termination thereof. The contributory benefits for a central civil service employee are provided through the General Provident Fund (GPF). Technically, the NPS replaces the GPF.

The GPF is a provident fund run for central government employees. It’s a pay-as-you-go scheme wherein the current contributions are used to finance the current withdrawals. Under the GPF, the employee contributes 8% of their monthly salary. Under the NPS, however, both the employer and the employee contribute 10% each.