Tucker Committee Recommendations on ABOLISH of CPS in Andhra Pradesh

Tucker Committee Recommendations on ABOLISH of CPS in Andhra Pradesh. Two options have been proposed for quitting from CPS to OPS in Andhra Pradesh by the CPS Expert Committee. 
Recommendations to the Expert Committee. The Expert Committee has thoroughly studied the Pensions Systems available across the Globe and proposes the following options for the State Government:

Tucker Committee Recommendations on ABOLISH of CPS in Andhra Pradesh

First Option (Option – A) is to revert back to OPS, which is a prerogative of the State Government
After analyzing the rising pension liabilities leading to massive financial obligations in the form of exponentially grown pension bill, but to support the concern of employees covered under NPS, the option to equalize or nearly equalize the CPS and OPS systems and to provide Minimum Assured Return, the Option – B is proposed.
This option besides providing Minimum Assured Return, proposed to create a system of decision making and budgetary / legislative support. These strategies include hike in employer’s contribution to equate / nearly equate with OPS and / creation of corpus fund etc., which are explained in detail in the following paragraphs.

Details of the Options proposed : Option : A

The Andhra Pradesh Joint Action Committee of Employees, Teachers, Workers and Retired Employees Associations in their representation to the Expert Committee has requested for abolition of Contributory Pension Scheme and restoration of Old Pension Scheme. They have explained the following reasons for abolition of the New Scheme :
  • Total AUM of Rs.7000/-Crores(approx) will be transferred to State Govt of A.P. which can be used to developmental activities.
  • Avoiding Expenditure of contributing Rs.700/- Crores Per Annum & its increasing implications towards Employer Contribution
  • Keeping Employee share of Rs.600 -700 Crores P.A. with Govt by creating GPF A/c. s to CPS employees, Government Public Account size will be sound enough to tap money from it incase of emergency.
  • No immediate financial implication towards Pension to the CPS employees.
  • If the CPS Scheme continues, the pension burden will be come down somewhere at the year 2040 only. No use to Government in near future.
  • The Financial Implications have been provided in detail in the Report and the Expert Committee leaves the decision to the State Government for abolition of Contributory Pension Scheme and restoration of Old Pension Scheme as requested by various Employees Associations.

Option : B – An upgraded version of CPS faclitating Pension under CPS almost on par with OPS.

The Expert Committee after through study of the Global and National perspectives and as part of Global Pension Reforms, as mentioned in Para 2 of prepage, proposes the following Immediate, Short, Medium and Long Term strategies to justify the demands of CPS employees by hiking employer’s contribution to equate / nearly equate with OPS and / or creation of corpus fund etc., as mentioned below
  • Hike in Employer’s (State Government) Contribution by 4% or 6% or 8% or 10% (Already Government of India have issued a Gazette hiking the Employer’s Contribution by 4% i.e. from the present 10% to 14%, which will be implemented from April 2019 onwards). GoAP may initiate steps for making an assurance in this aspect.
A Professional / Technical Committee to be constituted as part of Finance Department for employees’ Pension Fund Management with Chief Secretary as Chairman of the Committee, Secretary (Finance) as Member Convenor, Secretary (Legal) and representatives from Employees Service Associations. The functions of the Committee are as follows :-
  • Liaise with Union Government / other States for successful implementation of the Scheme.
  • Discuss and decide the Minimum Pension in case of exceptional cases
  • Plans for Minimum Assured Returns for CPS employees
  • Suggest Financial and Legal implications either in case of reverting back to OPS or CPS fund management to equate/nearly equate OPS and CPS
  • Formulate Legislative procedures in case Option B is agreed and to carryout budget implications thereafter
  • Suggest amendments in the existing G.Os in case of Family Pension and other matters
  • Any other activity pertinent from time to time for the welfare of CPS employees
  • Legislative support to protect the interest of the employees and the fund meant for them similar to The Pensions Act 2007 of the UK
  • In exceptional cases, where the pension is very low for CPS employees, the Committee proposes that this issue may be examined by the Professional / Technical Committee and a provision of minimum pension as per the recommendations of the Pay Revision Commission in the perspective of Social Security.
Medium and Long Term Strategies:
  • a) Equal / nearly equal pension may be given to CPS Employees by allocating required budget during that particular Financial Year (most probably from the financial year 2030 onwards). Through suppport of Legislature and discussion of technical group proposed hereunder.
  • b) Provision of Minimum Assured Returns for the CPS employees by exploring various opportunities by the Professional / Technical Committee – adding the budget to match the OPS and after going through the Committee recommendations and also mandated by the Legislature
  • c) However, an alternative for para (a) is creation of Pension CorpusFund in the Budget as another option to meet the requirement of CPS employees who have already completed certain period of Government service (maximum 13 years) and also for the new employees who join Government Service from now onwards. Feasibility needs to be examined by the Professional / Technical Committee
  • d) Pension fund allocation based on determinants of pension burdenviz., (i) Growth rate in recruitments, (ii) Growth rate in Dearness Allowance (Inflation Proof) and (iii) Growth rate in Pay Revision Commission (increase in salary)
Other Suggestions
  • The above mentioned models need to be supported by a hike in purchase annuity from the existing 40 percent of pension wealth to 100 percent. The same has been proposed by Government of India as optional
  • CPS pensioners may also be covered under Employees Health Schemeas is being done in case of OPS Pensioners
  • Extending Housing / Education Loansat affordable terms to the employees under CPS
  • The pension amount of CPS employees to be channelled through Treasury and Accounts as is being done in case of Old Pensioners to avoid dis-connect from the Government
  • Annuity Pension may be continued to spouse and family of the pensioners in terms of G.O.Ms.No.315 Finance (Pension-I) Department, dated 07.10.2010
  • G.O.Ms.N.121 Finance (Pension-I) may be amended such that the employee share out of the total accumulated pension wealth of the deceased employee may be paid back with interest to their legal heirs
  • Capacity Building of the CPS employees to inculcate Financial Literacy for getting better returns on their investments
  • Accountant General may be requested to maintain the accounts of individual employees contribution to ensure correctness of recovery from salary bills
  • Creation of Pension Wing in Finance Department to redress the grievances of CPS / OPS employees besides bringing various types of pensioners like youth pensions, old age pensions etc., under one umbrella
  • Dedicated Call Centre / Toll Free number along with an exclusive Web portal to cater the needs of Pensioners
  • GoAP may address PFRDA / NPS Trust to resolve hurdles in implementation of CPS from time to time. It may be requested to bear the risk of Pension Liability (as in case of SBI Pensions) in the event of unforeseen situations
  •  Extending the OPS to 2003 DSC Teachers does not come under the purview of this Committee as the issue is pending in High Court
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