Supreme Court Delivers: Pension Scheme Verdict

In today’s world, job seekers often choose government jobs because of post-retirement benefits, such as pensions. Before 2004, there was an old pension system that applied to all public servants. Under which they take a predetermined amount as a pension. From 2004, this system was abolished by the government; and the NPS was introduced by the government. 

However, there is always tension between government employees and the government regarding restoring the old pension scheme. Recently, the Supreme Court has ruled on the old pension system. Given the current situation, the question on everyone's mind is whether the old pension scheme is making a comeback. Let us understand the possibilities of the old pension system.

What Is The Old Pension And Its Key Features?

The old pension is a retirement scheme provided by the government. 

• The pension amount for a person is equal to half of the last month's salary. 

• The old pension scheme was a pension guaranteed by the state for the employee. 

• Any employee who has completed 10 years of service is eligible for a pension. 

• In addition, pensioners receive a dearness allowance (DA) each year, calculated based on their basic pay. 

• This allows them to increase their pension every year based on changes in the dearness allowance. 

• Applicants working in any field can apply for this scheme.

• If applicants relocate to other areas, they can still contribute through eNPS

When the government introduced the NPS, employees working after 2014 had to opt for the NPS as their default and only option.

Comment Of The Supreme Court Comment On OPS.

The Supreme Court has also commented on the Old Pension Scheme. It has been ruled that a pension is an employee right and that politicians should refrain from using this to increase their voter base. Recently, some states have decided to reinstate the old pension scheme. 

For example, the Maharashtra government has announced that it will reintroduce the old pension scheme for its employees. Punjab and Chhattisgarh governments also initiated measures in this direction. There are chances of a revival of the old pension scheme by the state government. However, the central government has not yet taken the necessary decisions.

The New Pension Scheme And Its Benefits

The New Pension Scheme is an initiative started by the government of India to provide retirement benefits to its citizens. The NPS will encourage savings habits among the people of India. In the NPS, each individual's savings of each person are pooled into a pension fund, which is then invested by professional fund managers in various schemes, such as equities, government bonds and corporate bonds. 

Each participant's contributions are collected until their retirement date. Participants also have the option to withdraw from the scheme before retirement or choose to take advantage of superannuation. However, the plan ensures that a portion of the savings is used to provide retirement benefits to the subscriber.

• The National Pension Scheme is believed to be the best and cheapest pension plan in the world.

• The applicants need to create an account and then obtain a permanent retirement account number.

• Applicants have the option to choose investment plans or select the auto option for higher returns.

• Tax deduction up to 20% of gross income under section 80 CCD (1) within the overall limit of Rs. 1.50 lakh under section 80 CCE.

• Tax deduction up to ₹50,000 under Section 80 CCD (1B) over and above the overall limit of Rs. 1.50 Lakh under Sec 80 CCE.

• Eligibility for tax exemption on lump sum deduction of 60% of accumulated pension wealth on attaining the age of 60 years or on retirement under Section 10(12A).

Conclusion

The ongoing debates on the NPS and the OPS boil down to pensioners having an income and the government burden. Ultimately, it is up to the government whether they will reinstate the OPS or not. However, the Supreme Court's pronouncements on OPS give hope to the pensioner that OPS will be reinstated. 

Learn more about the Supreme Court’s verdict on pensions, then click here.