The Andhra Pradesh government has decided to implement the guaranteed pension policy (GPS) for its employees by the replacing the existing contributory pension policy (CPS).
Under this new scheme the government guarantees 50 per cent of the last drawn salary as pension to retired employees, which is also similar to the old pension policy.
The government has also announced that pensioners will receive two instalments of dearness allowance (DA) along with working employees. This means that pensioners who are part of the old pension scheme (OPS), and have been receiving an increased amount of DA, will continue to receive this benefit.
In CPS, pensioners typically get around 20.3 per cent of their last drawn salary.
For the last four years, state government employees were demanding a return to the old pension scheme.
The decision to introduce the GPS was to ensure a comfortable pension to the employees as well as to guarantee that they would be minimally affected by rising costs of inflation.
CPS is variable as per the market conditions, under which employees contribute 10 per cent of their basic salary, while employers contribute up to 14 per cent, and this pooled contribution is further invested in market-linked instruments like stocks and bonds to potentially increase the fund’s value.
By implementing GPS, the government wants to protect the financial well-being of the employees but the finance department explains that returning to the OPS is financially unsustainable due to increasing life spans and the financial burden of regular pay revisions and DA enhancements.
However, details such as the exact employee and government contributions to the pension fund is yet to be clarified.