Andhra Pradesh Government Considers New Plan for Pension Benefits | Amaravati News

AMARAVATI: The state government launched an employee awareness campaign to explain that restoring the old pension system by replacing the existing contributory pension system (CPS) was not possible due to financial implications.
However, the state government has launched a new system, the Guaranteed Pension Scheme (GPS), to provide better pension benefits than the existing CPS.
The government made a detailed presentation to workers’ union representatives at the Joint Staff Council (JSC) meeting last week and asked for their feedback. The government felt that workers were being misled by some unions and decided to contact workers.
The government said it would need at least 1.12 lakh crore to pay salaries and pensions, accounting for 134 percent of the state’s own funds by 2030. By 2040, 170 percent would be exceeded.
“The Government recognizes that workers have legitimate concerns about CPS. Therefore, the idea is to come up with a tax-sustainable proposal for pension reforms that address these concerns. The result is the Andhra Pradesh Guaranteed Pension Scheme,” said Finance Minister Buggana Rajendranath.
Spending on salaries and pensions accounted for a disproportionately high proportion of government revenue. Also, the dependency ratio, the number of employed workers per retiree, is an unsustainable number at 1.55. He said it had become a global consensus that OPS-like performance-based schemes were unsustainable.
“The number one reason a move to OPS is becoming unsustainable is demographics. As people live longer, the share of retirees in total government personnel expenditure, both by number and by expenditure, is increasing sharply. This places an prohibitive burden on the government,” Buggana explained.
The finance department conducted investigations with experts and determined that the restoration of OPS for existing CPS employees was not sustainable. The GPS is based on a rigorous statistical model of pension payouts and corporate returns using actuarial calculations based on existing CPS employee profiles.
“Many leading pension reform experts from around the country were consulted to arrive at the AP GPS proposal,” said H Arun Kumar, Secretary (HR-GAD).
“It is intended to replace the uncertainty of not knowing what one would receive as an annuity from a fully market-linked CPS with AP GPS, where the annuity is known, guaranteed and funded entirely from contributions during the employee’s service. The AP GPS would provide a guaranteed fixed pension of 33% of base salary at the time of retirement, compared to the currently fluctuating CPS of 20%, which would result in a pension benefit increase of at least 53%,” said Sajjala Ramakrishna Reddy, Government Advisor and member of the High Level Committee on CPS.

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