Andhra Pradesh government mulls over new pension plan | Amaravati News

AMARAVATI: The state government launched a campaign to sensitize employees to explain that the restoration of the old pension scheme by replacing the existing contributory pension scheme (CPS) was not possible due to financial implications.
The state government, however, introduced a new scheme, the Guaranteed Pension Scheme (GPS), to provide better pension benefits than the existing CPS.
The government made a detailed presentation to employee union representatives at the Joint Staff Council (JSC) meeting held last week and solicited their comments. Feeling that employees are being misled by a few unions, the government has decided to reach out to employees.
The government said it would need at least 1.12 lakh crore to pay salaries and pensions, which is 134% of the state’s own resources by 2030. It would exceed 170% by 2040.
“The government recognizes that employees have a legitimate concern about the CPS. Therefore, the idea is to present a financially viable pension reform proposal that addresses this concern. The result is the guaranteed pension scheme of Andhra Pradesh,” Finance Minister Buggana Rajendranath said.
He said spending on wages and pensions is a disproportionate share of the state’s own revenue. Also, the dependency ratio, the number of active employees per retiree, is an unsustainable number at 1.55. He said there has become a global consensus that OPS-style defined benefit plans are unsustainable.
“The most important reason why a shift to the OPS becomes unsustainable is demographics. As people live longer, retirees’ share, both in number and expenditure, of total government personnel expenditure increases strongly. This places a prohibitive burden on the government,” Buggana explained.
The finance department researched with experts and found that catering OPS to existing CPS employees was not sustainable. The GPS relies on a rigorous statistical model of pension payouts and corpus returns that uses actuarial calculations based on existing CPS employee profiles.
“Many leading pension reform experts from across the country were consulted to arrive at the AP GPS proposal,” said H Arun Kumar, Secretary (HR-GAD).
“It aims to replace the uncertainty of not knowing what one would receive as a pension from a fully market-linked CPS with AP GPS, where the pension is known during the employee’s period of service, is guaranteed and is entirely funded by contributions The AP GPS would provide a guaranteed fixed pension at 33% of the base salary received at the time of retirement, compared to the current fluctuating CPS of 20%, resulting in an increase of at least 53% pension,” said Sajjala Ramakrishna Reddy, government adviser and member of the high-level committee on the PSC.


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