In a major policy decision, the Andhra Pradesh Cabinet on June 7 (Wednesday) approved the proposal to replace the Contributory Pension Scheme (CPS) with the Guaranteed Pension Scheme (GPS) for the government employees.
Under the GPS, the pensioners would receive 50% of their last drawn salary as pension as against 20.3% of their basic salary under the CPS.
Also, the government made certain provisions to adjust the impact of inflation under the GPS.
The new pension scheme was being introduced even as the government employees were insisting on scrapping the CPS and restoring the Old Pension Scheme (OPS).
The employees, who included teachers, had been seeking restoration of the OPS saying that other State governments too were contemplating reintroducing it.
The Cabinet meeting, chaired by Chief Minister Y.S. Jagan Mohan Reddy, cleared the draft A.P. GPS Bill.
Information and Public Relations (I&PR) Minister Ch. Srinivasa Venu Gopala Krishna told the media after the meeting that the new Bill had been drafted in a way that was beneficial to the employees.
“The Cabinet has discussed the draft Bill in detail. The government could have scrapped the CPS with a stroke of a pen. Instead, it has done an elaborate exercise to implement an alternative to it. The future generations will suffer if the OPS is brought back. The pension bill will surpass that of the salaries if the OPS is reintroduced. The government would have to pay ₹65,234 crore towards pensions by 2041 if the OPS, or the CPS is in vogue. The pension bill, including payments on loans, would be 220% of the State-owned resources. The payments will touch ₹3,73,000 crore by 2070,” the Minister said.
CPS vs GPS
Explaining the difference between the CPS and the GPS, Mr. Venu Gopala Krishna said the employees who joined service after September 1, 2004, would contribute 10% of their basic salary towards the pension under the CPS, while the government would release a matching amount. The employees could withdraw 60% of the corpus after retirement, while the remaining 40% would be annuity investment. As it would be linked to the market, there would be fluctuations in pension, he said.
In contrast, the GPS pensioner would get 50% of the basic in the last drawn salary as pension, while his or her contribution would be the same as 10% of the basic. The Dearness Relief (DR) announced by the Union government once in six months would be extended to the GPS pensioners, the Minister said.
“The GPS has no comparison with the CPS if the benefits are to be considered. The GPS ensures total safety to the retired employees. It will be a role model for the entire country. The GPS will be beneficial to both the government and employees,” he added.
“In a nutshell, the GPS pensioner will receive 150% more pension than the CPS pensioner. For instance, if the last drawn salary is ₹1 lakh, the retired employee will get ₹50,000 as a pension. By the time the employee attains the age of 82, his pension will touch ₹1.10 lakh per month as the DR is added every six months,” the Minister explained.
I&PR Commissioner T. Vijay Kumar was present.
