UPS may be replicated to other stakeholders of NPS: Finance Secretary

Financial Services Secretary M Nagaraju on Thursday expressed hope that the Unified Pension Scheme (UPS), which promises an assured pension of 50 per cent of the average basic pay drawn over the last 12 months, may be replicated for other stakeholders under the New Pension System (NPS).

Observing that NPS has emerged as a robust retirement savings mechanism in the country, he said, its growing assets under management and subscriber base is reflective of people's trust in the scheme.

The government has recently introduced the UPS under NPS for central government employees. The scheme is effective from April 1.

UPS is a unique contributory but defined benefit scheme that provides an assured payout of 50 per cent of the average basic pay for the last 12 months upon superannuation along with the benefit of inflation indexation through dearness relief, Nagaraju said, while speaking at the 1st International Research Conference on Pension, organised by PFRDA and IIM Ahmedabad here.

"I trust that implementation of the scheme, which has started from April 1 this year for Government of India employees, will build capacities for replicating the same level and demand for other stakeholders in the country," he said.

Talking about the Budget announcement, he said, the Finance Minister announced to set up a forum for regulatory coordination and development of pension products.

At a broad level, he said, "The forum would facilitate achievement of the objectives like enhancing pension coverage, identifying strategies to expand pension inclusion particularly for gig workers, informal sector employees and under privileged sections of the society and exploring fiscal sustainability, adequacy of pension benefits and potentials towards the universal pension system to ensure retirement security for all."  Despite the progress being made, he said, pension savings in India remain lower than in other emerging and OECD economies where pension assets exceed 80 per cent of GDP.

In India, he said, pension assets account for only about 17 per cent of the GDP.

Speaking at the event, PFRDA Chairperson Deepak Mohanty said the need for improved pension coverage in the country is "of utmost importance" as lack of old age coverage eventually leads to fiscal strain.

"So pension expansion is not just important for individuals but for the development of the country as well," he said.